What is a pension?

A pension is specifically designed as a fund that provides regular payments to retired employees. This financial arrangement is typically established by employers, allowing employees to receive a portion of their salary after retirement, which helps to ensure a steady income during their non-working years. It is often funded through contributions made by both the employee and employer during the employee's working life, and it can be structured in various ways, such as defined benefit plans or defined contribution plans.

Understanding this correctly emphasizes the importance of pensions in retirement planning and financial security for individuals who have dedicated years to their professions. Pensions play a critical role in alleviating economic pressures faced by retirees, allowing them to maintain their standard of living after they leave the workforce.