This is a debatable issue. Many companies offer pension plan as an annuity spread over the life of the employee. Here, the employee is assured of an identified Annuity every month. However, there are other companies who offer lump sum annuity. Both the methods have some advantages and disadvantages.

Lump sum Annuity:
The employer gives one payment as a final settlement of the pension claim of the employee. This is a substantial amount. The entire sum is at the disposal of the employee. Now, it is the wisdom of the employee that matters. If the lump sum annuity is managed properly, then it will generate the same amount of annuity as in the monthly annuity plan. There are many retired persons who have taken Lump sum Annuity and they are doing well because they are properly managing their investment. In fact the investment would pass on to the heirs of the pensioner. The problem arises if it is not properly managed. Then the person will be left with nothing for his living. Therefore, before investing, the pensioner has to take a careful view of the investment plan offered by the investment company. He has to carefully consider the risks involved in the investment. It is advisable that the opinion of an investment planner is also taken in the matter.

Annuity pension plan:
On the contrary, the Annuity pension plan offers monthly income to the investor. Here, the investor is assured of fixed income every month or in identified periodicity. This amount is guaranteed for the life of the investor. Many insurance companies offer additional benefits by way of insurance coverage for the spouse against ailment and accidents. So here the investor need not worry about the investment plan because it is the investment company that worries about it. The disadvantage of this system of Annuity is that the monthly annuity may not be commensurate with the inflation rate. So, in the long run, returns may not be of much help to the pensioner. Further, if the investment company is not wise in its investment, then it is the pensioner who is put to loss and inconvenience. Such incidents have happened earlier.

So it is the wisdom of the pensioner that ultimately prevails. The pensioner is advised to take the considered opinion of an investment expert in the matter.




Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Whiplash Injury Compensation

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