What is the difference between a pension paid through an annuity and a pension paid by the trustees?
A pension purchased by the annuity is fixed in its terms, which are determined when it is purchased. A regular pension will be paid by the trustees from the funds held by them. The amount is determined by actuarial valuation. The main difference between the two is that with an annuity the whole of the member’s available funds will be used to purchase the annuity. If the member dies before the annuity runs out, the insurance company takes the balance remaining whereas with the pension paid by the trustees the remaining balance can be used by the trustees to provide benefits for the dependents of the member. The latter pension is a more flexible option.
