What is an annuity and how different is it from pension?

An annuity is a simple investment in which for a fixed sum (say deposit), a regular sum including interest is paid to the annuitant. The repayment can be for a finite time or infinite. In case of infinite time, the payment depends on the life of the annuitant or the lives of the annuitants. In comparison, pension is what one receives as an employee as part of the remuneration for the efforts they put in for their employer. The pension is usually completely dependent on the salary one earns and by way of contributions to a pension plan, like the employees’ provident fund (EPF) and employees’ pension scheme (EPS). The pension depends on how much EPS corpus is built and how one wish to receive the pension on retirement.

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