PensionPension A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.+ read full definition plans are designed solely to provide retirement income, so you can only receive income (or make withdrawals) from these plans during retirement, typically from age 55 onward.
Savings plans are more flexible. You may not be allowed to take money out while you are with your employer. But once you leave your employer, you can transfer your savings out of the plan to use for retirement or any other goal.
Pension plans can offer:
- higher rates of employer contributions than savings plans (for many plans, but not all), and
- built-in discipline to ensure that you have the income you need in retirement.
Savings plans can offer:
- the flexibility to save for goals other than retirement, and
- investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition management fees that are often lower than those you pay as a retail investor.
Savings plans can be for any goal. Pension plans have a single focus: retirement.