What is the difference between an annuity and a pension?

An annuity is a financial product you buy from an insurance company, while a pension is an employer-sponsored retirement plan that pays you a guaranteed income for life.

Is a pension better than an annuity?

Yes, a pension is often better because the employer typically funds it and bears the investment risk, whereas an annuity requires you to pay a lump sum upfront and assume the cost.

Which is safer, an annuity or a pension?

A pension is generally safer because it is backed by the employer and often insured by the Pension Benefit Guaranty Corporation, while an annuity's safety depends entirely on the insurance company's financial strength.

Can I have both an annuity and a pension at the same time?

Yes, you can have both simultaneously because a pension comes from your employer, while an annuity is a separate product you purchase independently with your own savings.

What is a common mistake people make when choosing between an annuity and a pension?

A common mistake is taking a lump-sum pension payout and buying an annuity without comparing fees, which can reduce your lifetime income and expose you to higher costs.

Can I switch from a pension to an annuity?

Yes, you can switch from a pension to an annuity by taking a lump-sum distribution from your pension and using that money to purchase an annuity from an insurance company.

Are annuities and pensions interchangeable terms for retirement income?

No, they are not interchangeable because a pension is a defined-benefit plan funded by an employer, while an annuity is a defined-contribution product you fund yourself.

How much does an annuity cost compared to a pension?

An annuity costs you a large upfront premium plus ongoing fees, whereas a pension typically costs you nothing directly because your employer contributes to it during your working years.

What is a real-world use case for choosing an annuity over a pension?

A real-world use case is a self-employed worker who has no employer pension and buys an annuity with retirement savings to create a guaranteed monthly income stream.

Can I lose money with an annuity or a pension?

Yes, you can lose money with an annuity if the insurance company fails or you withdraw early, but you can also lose a pension if your employer goes bankrupt without sufficient funding.

Difference Between

Difference Between Annuity and Pension

Written byNex Virox Team

Editorial Team

Reviewed byVarshal Nirbhavane

Senior SEO & Organic Growth Professional · 5+ years

Published: September 3, 202620 min read

Quick answer

The main difference between Annuity and Pension is that an annuity is a financial product you buy, while a pension is an employer-sponsored retirement plan. Annuity is a contract providing guaranteed income in exchange for a lump sum, while Pension is a workplace benefit paying regular income after retirement.

Key takeaways

Core distinction: An annuity is a purchased insurance product, while a pension is an employer-sponsored retirement plan.
How each works: You fund an annuity with a lump sum; your employer funds a pension plan.
Cost and effort: Annuities require your upfront capital and management; pensions demand no personal contribution beyond employment.
Best-fit use case: Choose an annuity for guaranteed personal income; rely on a pension for employer-funded retirement security.
Common decision mistake: People often confuse a pension's guaranteed benefit with an annuity's variable payout options and fees.

Table of Contents18 sections

Difference Between Annuity and Pension: Comparison Table

Aspect	Annuity	Pension
Definition	A financial product sold by an insurance company that pays a fixed income stream.	A retirement plan sponsored by an employer that pays benefits after retirement.
Purpose	Converts a lump sum of savings into guaranteed periodic payments for a set term or life.	Provides income replacement for employees after they stop working, funded during their career.
Core Mechanism	You pay premiums to an insurer, which invests and then distributes payments back to you.	Employer (and sometimes employee) contributes to a fund that pays a defined benefit later.
Purchaser	Bought individually by a person, often with personal savings or rolled-over retirement funds.	Established and managed by an employer, union, or government for its workers.
Funding Source	Funded entirely by the individual's own premiums or transferred account balance.	Funded mainly by employer contributions, sometimes matched by employee payroll deductions.
Payment Guarantee	Guaranteed by the insurance company's claims-paying ability and state guaranty associations.	Guaranteed by the employer's plan assets, often backed by the Pension Benefit Guaranty Corporation.
Payment Formula	Based on premium amount, your age, interest rates, and chosen payout option at purchase.	Based on years of service, final average salary, and a multiplier set by plan rules.
Payment Duration	Can be lifetime, fixed-term (e.g., 10 years), or joint-life with a spouse.	Typically pays for the retiree's lifetime, with optional survivor benefits for a spouse.
Portability	Highly portable; you own the contract and can move it or name any beneficiary.	Generally tied to one employer; leaving early may reduce or freeze earned benefits.
Vesting Period	No vesting requirement; ownership of the contract begins immediately upon purchase.	Requires a vesting period, often 3 to 5 years, before you own the accrued benefit.
Investment Control	No control after purchase; the insurer manages all underlying investments for you.	No individual control; plan trustees or managers allocate the fund's investments.
Market Risk	Insurer absorbs investment risk; your payments stay fixed regardless of market swings.	Employer or plan sponsor bears market risk for defined-benefit plans, not the worker.
Inflation Protection	Fixed annuities lack it; inflation-adjusted riders exist but reduce initial payment amounts.	Rare in private plans; some public pensions offer cost-of-living adjustments annually.
Liquidity	Very low; funds are locked in and surrender charges apply for early withdrawal.	Very low; you cannot access the lump sum before retirement without penalties.
Death Benefit	Can include a refund option paying remaining premiums to heirs if you die early.	May pay a reduced survivor pension to a spouse, but rarely a lump sum to other heirs.
Tax Treatment	Growth is tax-deferred; payments are taxed as ordinary income when received.	Contributions are pre-tax; distributions are fully taxable as ordinary income.
Upfront Cost	Requires a large single premium or ongoing premiums before any payments begin.	No upfront cost to the employee; contributions are deducted gradually from salary.
Payment Start	Starts on a date you choose, often immediately or deferred to a future age.	Starts at a plan-defined normal retirement age, typically 65 or after 30 years of service.
Payment Amount	Fixed at purchase; a $100,000 premium at age 65 might yield roughly $500 monthly.	Varies by formula; 30 years at a 1.5% multiplier on a $60,000 salary yields $27,000 yearly.
Flexibility	Offers multiple payout options: life-only, period-certain, joint-survivor, or cash refund.	Limited options; usually a straight-life annuity or a reduced joint-and-survivor pension.
Regulation	Regulated by state insurance departments and subject to insurance law standards.	Regulated by the Employee Retirement Income Security Act and the IRS for private plans.
Sponsor Risk	Risk falls on the insurer; if it fails, state guaranty funds cover limited amounts.	Risk falls on the employer; if it goes bankrupt, the PBGC covers benefits up to a cap.
Availability	Available to anyone with capital, regardless of employment status or age.	Available only to employees of companies or governments that offer such a plan.
Common Types	Immediate, deferred, fixed, variable, indexed, and longevity annuities exist.	Defined-benefit plans, cash-balance plans, and government or military pensions exist.
Typical Users	Retirees with a lump sum who want guaranteed income without employer involvement.	Career employees in government, education, unions, or large corporations.
Cost Structure	Charges include mortality fees, administrative fees, and rider costs inside the contract.	Administrative costs are pooled across all plan members and paid from fund assets.
Scalability	Scales per contract; you can buy multiple annuities from different insurers over time.	Scales only within one employer's plan; changing jobs resets your accrual rate.
Survivor Coverage	You choose the survivor percentage (50%, 75%, 100%) at purchase, affecting payout.	Spouse must typically sign a waiver to decline the automatic joint-survivor pension.
Longevity Risk	Transferred fully to the insurer; lifetime payments continue no matter how long you live.	Transferred to the plan sponsor; the fund must pay regardless of retiree lifespan.
Best-Fit Scenario	Fits individuals wanting to convert personal savings into predictable, self-funded income.	Fits career employees seeking employer-funded, formula-based retirement security.

What Is Annuity?

An annuity is a financial product sold by insurance companies that converts a lump sum into a steady stream of income. It exists to protect retirees from outliving their savings by guaranteeing regular payments, typically for life or a fixed period.

Definition of Annuity

An annuity is a contract between an individual and an insurer where the purchaser pays a premium, either upfront or over time, in exchange for periodic disbursements that begin immediately or at a future date. These payments are calculated using actuarial tables and investment returns.

Key Characteristics of Annuity

Characteristic	What It Means in Practice
Insurance contract	An insurer underwrites the product, assuming the risk that you might live longer than average.
Lump-sum conversion	You trade a single large payment for a predictable series of smaller payments over time.
Guaranteed income	Payments continue regardless of stock market performance, offering a stable cash flow.
Longevity protection	A lifetime annuity pays as long as you live, eliminating the fear of running out of money.
Tax deferral	Earnings grow tax-free until you withdraw them, allowing the balance to compound faster.
Payout options	You can choose life-only, joint-life, or period-certain terms to match your family situation.
Surrender period	Early withdrawals are often penalised for the first several years after purchase.
Fixed or variable	Fixed annuities pay a set rate; variable annuities pay based on underlying investment performance.
No contribution limits	Unlike IRAs or 401(k)s, you can invest large sums without annual caps.
Death benefit	Some contracts pay a remaining balance to beneficiaries if you die before payouts begin.

Common Examples of Annuity

TIAA Traditional – a fixed annuity widely used by university professors to guarantee retirement income.
Vanguard Immediate Annuity – a single-premium product that starts monthly payments within a year of purchase.
Fidelity Income Annuity – offers lifetime payouts with optional inflation protection riders.
New York Life Fixed Annuity – provides a guaranteed interest rate for a set term, often five or seven years.
Jackson National Variable Annuity – links payouts to mutual fund sub-accounts, offering growth potential.
Annuity.org Immediate Annuity – a marketplace example where retirees buy income streams with a single check.
MassMutual Deferred Annuity – accumulates value for years before converting to a payout phase.
State Farm Lifetime Income Annuity – sold through local agents, focuses on guaranteed monthly checks.
USAA Fixed Index Annuity – credits interest based on a stock index, with a floor protecting against losses.
Annuity from a Pension Lump-Sum – a former employer converts your pension balance into an annuity contract.

Advantages and Limitations of Annuity

Advantages	Limitations
Provides a predictable income stream that cannot be outlived.	Fees and commissions are often high, eating into long-term returns.
Removes market risk from your retirement portfolio entirely.	Inflation can erode purchasing power if you skip an inflation rider.
Earnings grow tax-deferred, similar to a retirement account.	Money is locked up; surrender charges punish early withdrawals.
Offers customisable terms for joint coverage with a spouse.	You lose control of the principal; the insurer keeps unused funds.
Simplifies budgeting with fixed, scheduled payments.	Variable annuities carry complex riders that are hard to compare.
Protects against longevity risk better than most other products.	Returns often lag index funds over long holding periods.
Can be structured to leave a death benefit to heirs.	Once annuitised, you cannot change payout terms or access the lump sum.
No annual contribution caps, unlike IRAs or 401(k) plans.	High commissions incentivise agents to sell unsuitable products.
Fixed versions offer a guaranteed minimum interest rate.	Insurer insolvency risk means your guarantee is only as strong as the company.
Helps convert a windfall into a disciplined retirement plan.	Complexity of riders and sub-accounts confuses even experienced investors.

What Is Pension?

Pension is a retirement plan that pays you a fixed income for life after you stop working. It replaces a portion of your salary so you can cover living costs. It exists to provide financial security in retirement.

Definition of Pension

A pension is a defined-benefit retirement arrangement where an employer, government, or union guarantees a predetermined monthly payment to a retiree. The benefit amount is calculated using a formula based on salary history, years of service, and age at retirement, funded by employer contributions.

Key Characteristics of Pension

Characteristic	What It Means in Practice
Guaranteed income	You receive a set monthly payment for life, regardless of how financial markets perform.
Employer funded	The employer contributes most or all of the money, so you do not bear investment risk.
Formula based	Your benefit equals a formula using your final salary and total years of service.
Lifetime payout	Payments continue until you die, and often a portion continues for a surviving spouse.
Vesting period	You must work a minimum number of years, often five, to keep any pension rights.
Tax deferred	Contributions and investment growth are not taxed until you withdraw money in retirement.
Not portable	You generally cannot move a traditional pension to a new employer if you change jobs.
Inflation risk	Many pensions pay a flat amount that loses purchasing power as prices rise over decades.
Managed by trustees	A board of trustees oversees the pension fund and makes investment decisions on your behalf.
Government insured	In many countries, a state agency guarantees a portion of your benefit if the plan fails.

Common Examples of Pension

Social Security (US) – a federal pension funded by payroll taxes that pays retired workers a monthly benefit.
State Pension (UK) – a flat-rate government pension paid to qualifying retirees based on National Insurance contributions.
CalPERS – the California Public Employees' Retirement System, one of the largest US public pension funds.
Canada Pension Plan – a contributory public pension providing retirement income to Canadian workers.
Teachers' Pension Scheme (UK) – a defined-benefit pension covering school teachers in England and Wales.
Military Retirement (US) – a pension paying veterans after 20 or more years of active-duty service.
Japan Pension Service – the public pension system covering all Japanese residents, including employees and self-employed.
Australian Superannuation – a compulsory employer-funded retirement system that pays a lump sum or income stream.
German Gesetzliche Rentenversicherung – the statutory pension insurance scheme for German employees.
Netherlands ABP – the pension fund for Dutch government and education employees, among the world's largest.

Advantages and Limitations of Pension

Advantages	Limitations
Provides a predictable, stable income stream that you cannot outlive in retirement.	Locks you into one employer; leaving early can drastically reduce your final benefit.
Shifts investment management and market risk away from you to the plan sponsor.	Offers no control over how your money is invested or when you can access it.
Rewards long service with a benefit that grows with each additional year worked.	Pays a flat amount that steadily loses real value to inflation over a long retirement.
Often includes survivor benefits so your spouse keeps receiving income after you die.	Provides no lump-sum cash for emergencies, large purchases, or inheritance planning.
Requires no financial literacy or active decision-making on your part.	Can be reduced or frozen if the employer faces bankruptcy or restructures the plan.
Backed by government insurance schemes that protect a portion of your benefit.	Offers no flexibility to adjust payments if your health, needs, or lifestyle change.
Benefits are calculated on final salary, favouring workers who receive late-career raises.	Penalises workers who change jobs often, as each short stint yields a smaller benefit.
Provides a foundation of guaranteed income that lets you take more risk elsewhere.	Typically pays less than a well-invested individual retirement account over the long term.
Payments are often protected from creditors and cannot be seized in bankruptcy.	Fails to keep pace with rising healthcare costs, which grow faster than general inflation.
Creates a forced savings discipline that prevents you from spending retirement money early.	Leaves no remaining balance for heirs if you die early, unlike a savings account or annuity.

Similarities Between Annuity and Pension

Shared Aspect	How Annuity and Pension Are Alike
Retirement Income Goal	Both an annuity and a pension exist to replace employment wages with a steady income during retirement.
Longevity Protection	An annuity and a pension both shield retirees from the financial risk of outliving their accumulated savings.
Periodic Payments	An annuity and a pension both deliver money to the recipient through a recurring schedule, typically monthly.
Financial Product Category	An annuity and a pension both function as structured financial instruments designed for long-term income distribution.
Principal Accumulation	An annuity and a pension both require a pool of funds to be built up before regular payouts can begin.
Actuarial Calculations	An annuity and a pension both use life expectancy data and actuarial science to determine payout amounts.
Tax Deferral Benefit	An annuity and a pension both allow invested money to grow without immediate taxation until withdrawal occurs.
Income Stream Duration	An annuity and a pension both can be structured to provide income for the remainder of the recipient's lifetime.
Fixed Payout Options	An annuity and a pension both offer versions where the payment amount stays constant for the entire payout period.
Survivor Beneficiary Design	An annuity and a pension both allow the owner to name a spouse or dependent to receive ongoing benefits after death.
Inflation Adjustment Option	An annuity and a pension both can include cost-of-living adjustments to help payments keep pace with rising prices.
Lump-Sum Conversion	An annuity and a pension both permit the recipient to take the entire accumulated value as a single cash payment.
Guaranteed Income Feature	An annuity and a pension both provide a contractual promise of income that does not depend on stock market performance.
Regular Contribution Funding	An annuity and a pension both are typically funded through systematic contributions made over many working years.
Professional Fund Management	An annuity and a pension both rely on professional investment managers to oversee the underlying assets.
Regulatory Oversight	An annuity and a pension both operate under government regulations designed to protect the recipient's financial interests.
Payout Calculation Method	An annuity and a pension both compute periodic payments using the account balance divided by an actuarial factor.
Early Withdrawal Penalties	An annuity and a pension both impose financial penalties if the recipient accesses funds before reaching retirement age.
Employer Sponsorship Role	An annuity and a pension both can be established and funded by an employer as part of a compensation package.
Retirement Age Dependency	An annuity and a pension both determine the start of income based on the recipient's age at the time of election.
Death Benefit Provision	An annuity and a pension both may pay a remaining balance to heirs if the recipient dies early in the payout phase.
Income Tax Liability	An annuity and a pension both treat the received payments as ordinary taxable income for the retiree.
Contractual Legal Agreement	An annuity and a pension both are governed by a formal contract that specifies terms, conditions and payment rules.
Funding Source Variability	An annuity and a pension both can be purchased with either personal savings or employer-provided contributions.
Payment Frequency Choice	An annuity and a pension both allow the recipient to select monthly, quarterly or annual distribution schedules.
Portability Restrictions	An annuity and a pension both limit the owner's ability to transfer the income stream to another unrelated party.
Interest Rate Sensitivity	An annuity and a pension both have payout values that are influenced by prevailing interest rates at the time of calculation.
Financial Planning Tool	An annuity and a pension both serve as central components in a retiree's comprehensive retirement income planning strategy.
Risk Transfer Mechanism	An annuity and a pension both shift the investment and mortality risk away from the individual and onto the provider.
Long-Term Outcome Focus	An annuity and a pension both prioritize sustained financial security across the full retirement horizon.

Annuity or Pension: Which Should You Choose?

The single variable that decides it for most people is who controls the money. An annuity is a product you buy with your own savings; a pension is an employer-sponsored plan. Choose based on whether you need guaranteed personal income or an employer-funded retirement benefit.

When to Use Annuity

Choose Annuity when you have a lump sum from savings, an inheritance, or a 401(k) rollover. Annuities suit people who want guaranteed personal income without employer involvement. They work best when you control the principal, need flexible payment timing, or want to lock in lifetime payouts starting at a specific age.

When to Use Pension

Choose Pension when your employer offers a defined-benefit plan that pays a monthly amount for life. Pensions suit long-tenured employees who value a predictable, employer-managed payout. They work best when you want spousal survivor benefits, cost-of-living adjustments, or a benefit calculated from your final salary and years of service.

Common Misconceptions About Annuity and Pension

Common Myth	The Reality
"An annuity and a pension are the exact same financial product."	An annuity is a contract you buy from an insurer, while a pension is an employer-sponsored retirement plan that pays lifetime income.
"You can only receive a pension if you work for the government."	Private corporations also offer pensions, but only 15% of private-sector workers had one in 2023, down from 38% in 1980.
"All annuities pay a fixed monthly amount forever."	Variable annuities and indexed annuities have payouts tied to market performance or an index, so monthly income can fluctuate.
"A pension is guaranteed by the federal government no matter what."	The PBGC insures most defined-benefit pensions, but it caps benefits at $77,386 per year for a 65-year-old in 2024.
"Once you buy an annuity, you can never access your principal again."	Immediate annuities surrender liquidity, but deferred annuities often include a surrender period after which you can withdraw funds, usually with fees.
"Pensions are always better than annuities for retirement income."	Annuities can offer higher payouts than underfunded pensions; a 65-year-old male can get $6,500 monthly from a $1M immediate annuity in 2024.
"You lose all your pension money if you die before retirement."	Most defined-benefit plans provide a surviving spouse benefit, typically 50% to 100% of the pension, unless you waive it in writing.
"Annuities are only for wealthy retirees with extra cash."	You can start an annuity with as little as $5,000, and many insurers offer annuities inside IRAs and 401(k)s for average savers.
"Your pension is fully funded by your employer, so you pay nothing."	Many pension plans require employee contributions; for example, California state employees contribute 8% of their salary to CalPERS.
"Annuities always charge high fees that eat your returns."	Immediate and fixed annuities often have zero ongoing fees; high fees apply mainly to variable annuities with riders, averaging 2.3% annually.
"A pension pays the same amount to every retiree in the company."	Pension benefits are calculated using a formula based on your salary and years of service, so two retirees can get very different amounts.
"You can cash out your annuity anytime without penalty."	Most annuities have surrender charges that decline over 5 to 10 years, and withdrawals before age 59½ incur a 10% IRS penalty.
"If your company goes bankrupt, your pension disappears completely."	The PBGC takes over terminated plans and pays benefits, though you may lose amounts above the guaranteed cap, which was $77,386 in 2024.
"Annuities are not protected from creditors in bankruptcy."	ERISA-qualified annuities and most state-regulated annuities are exempt from creditor claims, similar to pension protections under federal law.
"A pension is always adjusted for inflation each year."	Only 40% of private-sector pensions include cost-of-living adjustments; most public pensions have COLAs, but many were suspended after 2008.
"You must buy an annuity with a lump sum of cash."	You can fund an annuity with periodic premiums over 5 to 30 years, making it accessible for regular savers without a large upfront payment.
"Pensions are taxable income, but annuity withdrawals are not."	Both pension payments and annuity withdrawals are taxed as ordinary income; only the after-tax portion of your annuity principal is tax-free.
"Annuities are a type of investment like stocks or mutual funds."	An annuity is an insurance contract that provides guaranteed income; it is not an investment vehicle, though variable annuities invest in subaccounts.
"If you leave your job, you forfeit all your pension benefits."	After 5 years of vesting, you are entitled to a deferred pension at retirement; leaving early does not erase your earned benefit.
"A joint-life annuity pays the same amount as a single-life annuity."	A joint-life annuity pays 10% to 30% less per month because it covers two lives, reducing the insurer's risk of early death.
"Pensions are only for employees who stay at one company for 30 years."	Vesting rules now require only 5 years of service, and many plans allow you to accrue benefits from day one, not after decades.
"Annuities are a bad deal because you lose money if you die early."	Life-only annuities forfeit the balance at death, but you can buy a period-certain or cash-refund rider to protect beneficiaries for an extra cost.
"Your pension benefit is based on your final salary only."	Most plans use a career-average formula or a final-average over your highest 3 to 5 years, not just your last paycheck.
"Annuities are not regulated, so companies can cheat you."	State insurance departments regulate annuities, and state guaranty associations protect up to $250,000 in annuity benefits per insurer.
"You can roll a pension into an IRA whenever you want."	You can only roll over a lump-sum pension distribution after you leave the employer or retire; active employees cannot move pension assets.
"Annuities are only sold by shady brokers looking for commissions."	Fee-only fiduciaries can sell annuities for a flat fee; commission-based sales are common but regulated under suitability rules by FINRA and state insurance.
"A pension is always safer than an annuity because it is backed by the employer."	Annuities are backed by insurer reserves and state guaranty funds, which have never failed a policyholder in over 40 years of state programs.
"You must start taking annuity payments immediately after buying."	Deferred annuities let you delay income for years or decades; for example, a 55-year-old can buy a deferred annuity that starts at age 70.
"Pensions are not portable, so you lose all value if you switch jobs."	You can leave your pension in the old plan, take a lump-sum buyout, or roll it into an IRA, preserving the present value of your benefit.
"Annuities and pensions both stop paying when you die, with no exceptions."	Both can include survivor options; pensions default to a 50% spouse benefit, and annuities offer joint-life, period-certain, or cash-refund riders.

Conclusion

Difference Between Annuity and Pension comes down to control: pensions provide guaranteed lifetime income managed by an employer, while annuities are insurance products you purchase for flexible payouts. Choose a pension for employer-funded security; choose an annuity for personal retirement income customization.

FAQs on Difference Between Annuity and Pension

What is the difference between an annuity and a pension?: An annuity is a financial product you buy from an insurance company, while a pension is an employer-sponsored retirement plan that pays you a guaranteed income for life.
Is a pension better than an annuity?: Yes, a pension is often better because the employer typically funds it and bears the investment risk, whereas an annuity requires you to pay a lump sum upfront and assume the cost.
Which is safer, an annuity or a pension?: A pension is generally safer because it is backed by the employer and often insured by the Pension Benefit Guaranty Corporation, while an annuity's safety depends entirely on the insurance company's financial strength.
Can I have both an annuity and a pension at the same time?: Yes, you can have both simultaneously because a pension comes from your employer, while an annuity is a separate product you purchase independently with your own savings.
What is a common mistake people make when choosing between an annuity and a pension?: A common mistake is taking a lump-sum pension payout and buying an annuity without comparing fees, which can reduce your lifetime income and expose you to higher costs.
Can I switch from a pension to an annuity?: Yes, you can switch from a pension to an annuity by taking a lump-sum distribution from your pension and using that money to purchase an annuity from an insurance company.
Are annuities and pensions interchangeable terms for retirement income?: No, they are not interchangeable because a pension is a defined-benefit plan funded by an employer, while an annuity is a defined-contribution product you fund yourself.
How much does an annuity cost compared to a pension?: An annuity costs you a large upfront premium plus ongoing fees, whereas a pension typically costs you nothing directly because your employer contributes to it during your working years.
What is a real-world use case for choosing an annuity over a pension?: A real-world use case is a self-employed worker who has no employer pension and buys an annuity with retirement savings to create a guaranteed monthly income stream.
Can I lose money with an annuity or a pension?: Yes, you can lose money with an annuity if the insurance company fails or you withdraw early, but you can also lose a pension if your employer goes bankrupt without sufficient funding.