What is a pension annuity? A plain-English guide
A pension annuity — the official name is a single premium immediate annuity, or SPIA — is the simplest financial product most people have never heard of. You give an insurance company a lump sum once. In return, they send you a check every month for the rest of your life. That's the whole product.
The old-fashioned pension, rebuilt
If your father or grandfather retired with a company pension, this is the same idea. A pension was simply an employer converting money into lifetime income. Companies stopped offering them — but the insurance machinery that made pensions work never went away. A pension annuity lets you build your own.
What makes it different from other annuities
The word "annuity" has a deservedly bad reputation — many are complex, high-fee products. A SPIA is the exception, for three reasons:
- No fees. There is no annual charge, no management fee. The monthly number you're quoted is the number you get.
- No market risk. Your check doesn't depend on an index or a portfolio. It is contractually guaranteed.
- One honest number. There are no projections or "hypothetical returns." The insurer must pay what it quoted, for life.
What about my heirs?
The quotes we show are life with cash refund: if you pass away before your payments add up to what you put in, your beneficiary receives the difference as a lump sum. The money never just disappears.
The honest trade-off
You give up access to the lump sum. That's the price of the guarantee, and it's why a SPIA suits part of your savings — the part whose job is paying your bills every month, forever — not all of them.