A pension provides regular income payments that you would receive for the rest of your life when you stop working--typically when people retire. A pension plan is a large pool of savings grows over time through contributions from workers or plan participants and their employer or plan sponsor. The plan assets are managed by professional investment managers, and most of the risks (such as investment risk) associated with managing plan assets will be assumed by the plan sponsor rather than plan participants. Particulars will vary from plan-to-plan. For example, there are variables such as how the money or contributions are set aside, who makes contributions, how the income is generated, when payments are made, the types of payments that are made, and how long pension payments last. The basic idea is that the longer you work the higher the payout. There may be tax breaks for pension contributions and there are limits on how much can go into a plan. Many pensions are payable to a surviving spouse on the death of the policyholder, and some pension payments are inflation-adjusted. The term pension is most often associated with defined benefit pension plans that provide regular, annuity-like payments to retirees. This is in contrast to defined contribution plans such as the 401k that shift most responsibilities onto employees and do not provide guaranteed lifetime income.

"Lock in a Lifetime of Income" with Immediate Annuities

The financial crisis has resulted in renewed interest in immediate annuities which can be used to lock-in stable, guaranteed income for a lifetime. "An immediate annuity can function just like a pension, producing a predictable payout. As the "immediate' part of the name suggests, the distributions start shortly after the money is invested." Longevity risk , inflation protection, how much to annuitize , and adding annuities over time are addressed in this article. Source: Wall Street Journal...
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Falling Interest Rates Equate to Lower Annuity Payments and Pension Income for Thousands of UK Retirees

Interest rates in many countries are at historic lows as a result of monetary policy that is intended to address the financial crisis. This low rate environment will have a profound impact on the finances of many retirees since interest rates are a key ingredient in annuity payments . "Thousands of savers who are about to retire could lose hundreds of pounds each year because leading pension firms have cut their annuity rates over the last two weeks, with Norwich Union, Standard Life and...
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Consider Alternatives Such as Immediate Annuities to “Stop Risking Life Savings”

Article encourages partial annuitization through fixed annuities as a prudent approach to planning one's retirement finances. Even if you invest well and diversify your portfolio, you can't be completely sure that you'll outlive your money. That's where putting a portion of your assets into an immediate annuity can be useful -- by guaranteeing a stream of income for life, supplementing what you'll get from Social Security and any employer pension you might receive. Source: Motley Fool Full Story

Are the companies that provide annuity products safe in the current upheaval of the banking and financial services industry?

There has been a ton of recent discussion in the press about the financial health of life and