Pensions – definitions – Annuity

An annuity is a fixed amount of money paid each month or each year until a particular event (such as a death). It is a common way to pay a pension to someone who was a member of a defined contribution scheme. 

When an employee retires, their pension scheme can make a single payment, usually to an insurance company to buy an annuity. The insurance company will then pay an annuity to the retired employee.

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