Page 33 - Insurance Times October 2020

BE WISE AT 60

AND ABOVE -

PENSION AND

ANNUITY

"It is the set of the sails, not the direction of the However, in our regular conversations pension and annuity
wind that determines which way we will go." are used interchangeably conveying the same meaning. In
---Jim Rohn this article also they are used interchangeably.

Pension can be a defined benefit or a defined contribution.
Pension is generally defined as a regular payment made by Defined benefit is one where only the benefit is defined like
the state to people who attained the age of retirement or 50% of the employee's last drawn salary etc., where the
at the time of death of an employee to the widow or to corpus to support that kind of pension is made available by
some disabled people.
the employer. In Defined contribution method, an amount
is deducted from the employee's salary month on month and
Annuity is a long-term investment that is issued by an
insurance company designed to help maintain a regular invested through a recognised fund. These amounts will get
income to the individual or the family. This kind of regular accumulated to form a corpus. At the end of the term like
income can be of various types as described in this article. resignation, retirement or death of an employee, the
The amounts payable also depends on the type of payment amount accumulated will be transferred to a recognised (by
government of India) pension authority from where he will
an individual chooses.
get regular amounts. It can be monthly, quarterly, half-
yearly or yearly pension.

About the author In case of individuals, they can choose a pension plan which

Sreenivas Murthy is normally sold by a life insurance company in India and keep
Alumnus of IIM Bangalore on investing in that plan. Different life insurance companies
Ex-Direct Recruit Manager - LIC of India offer products with different features. An individual can
Ex - Chief Manger with Aditya Birla Sun choose according to the requirement. The regular payments
Life insurance company made to the customer by the company is termed as annuity.
The Insurance Times, October 2020