Can we rely on pensions?

[adamu]

I searched the RetireWiki but couldn't find any details about inflation.

If you figure it out / digest the above information, you are more than welcome to add it

[Tkydon]

Excuse the question, and maybe it's a US/UK terminology issue, but I'm wondering about a private pension vs. an annuity.

Would anyone care to lay out the similarities and differences?

Private pensions themselves can be radically different. You can have pensions that,

1. Invest only in government bonds
2. Invest directly in the market
3. Invest in private equity and real-estate.

The structure and payout of private pension is incredibly varied as well.

In Canada and America private pensions are a benefit of employment.

..........................

Annuities can work in a few different ways, but essential you enter into a contract to receive a fixed or variable return over a set period of time.

Annuities do not require you to be a part of a company or organization and are often sold in a way similar to insurance.

The annuity company then takes your premiums and invest them attempting to make a profit net the return they will need to pay you. (Again it can be a Risky investment, or an incredibly safe investment),

A Private Pension, 401k, or iDECO is a product to accumulate funds in a tax advantaged way from regular contributions from Income to prepare for retirement.

An Annuity is a product to distribute those accumulated funds as a regular Income Stream in retirement.

You can think of the Annuity as the reverse of a home loan mortgage. You have a sum of money (perhaps from a Private Pension, 401k, or iDECO), with which you purchase an Annuity, which the Annuity Company invests and which earns a yield/interest. They pay you an agreed Income Stream out of the yield/interest and from the Principle, which reduces the Principle and therefore the yield/interest over time, until the balance of the Annuity Fund reaches Zero.

For many Private Pensions, 401k, or iDECO, at the date you have elected for 'Retirement', you will perhaps take a (partial) One-Time Lump Sum, and/or use the balance of accumulate funds to purchase an Annuity (maybe from the same or a different company) that will then pay you a regular income stream in retirement, until your death, and any remaining balance in the Annuity fund will be inherited by your heirs as part of your Estate.

[northSaver]

If you figure it out / digest the above information, you are more than welcome to add it

Done! And thanks again to ClearAsMud for highlighting the details.