What is an occupational annuity?

An occupational annuity is a type of retirement income product that is provided by an employer as part of an employee's overall compensation package. It is designed to provide a steady stream of income to the retiree for the rest of their life, once they have reached the age of retirement. An occupational annuity is typically funded through regular contributions made by the employer and/or the employee over the course of the employee's career. These contributions are then invested by the pension provider in order to generate returns that will fund the future annuity payments. The amount of income provided by an occupational annuity is determined by a variety of factors, including the amount of contributions made, the age of the retiree, and the prevailing interest rates at the time the annuity is purchased. Some occupational annuities also offer options for survivors' benefits, which can provide continued income to a spouse or other designated beneficiary after the retiree's death. Occupational annuities are often seen as a valuable employee benefit, as they provide a reliable source of retirement income that is not dependent on the performance of financial markets. However, they also come with certain risks and limitations, such as the potential for inflation to erode the purchasing power of the annuity payments over time. Overall, occupational annuities can be an important part of a comprehensive retirement planning strategy, providing retirees with a measure of financial security and peace of mind during their later years.