A pension is a financial arrangement that provides individuals with a regular income during their retirement years. It is a form of retirement plan where individuals contribute money during their working years, and upon retirement, they receive periodic payments to support their living expenses. Pensions are a common form of retirement benefit and are designed to ensure financial security for retirees.

Key features of pensions include:

1. Contributions:
• Individuals contribute to their pension fund during their working years. These contributions can come from employees, employers, or both.
2. Accumulation:
• Contributions made to the pension fund accumulate over time. The funds are often invested to generate returns, helping to grow the overall value of the pension pot.
3. Vesting Period:
• There is usually a vesting period, during which individuals must remain in their employment to be eligible for the full pension benefits. Once vested, individuals are entitled to receive the pension upon retirement.
4. Retirement Payouts:
• Upon retirement, individuals receive regular payouts from their pension fund. These payouts can be in the form of a lump sum, annuity payments, or a combination of both.
5. Types of Pensions:
• Defined Benefit Pension: The pension amount is predetermined based on factors such as salary and years of service. Employers often bear the investment risk in defined benefit plans.
• Defined Contribution Pension: The pension amount depends on the contributions made and the investment performance. Individuals bear the investment risk in defined contribution plans, such as 401(k) plans.
6. Government Pensions:
• Many countries have government-sponsored pension plans to provide financial support to citizens in their retirement. Examples include Social Security in the United States and the National Pension System (NPS) in India.
7. Private Pensions:
• Employers may offer private pension plans to their employees as part of their employee benefits package. These plans can be funded by the employer, the employee, or both.
8. Annuities:
• Some pension plans provide annuities, which are regular payments made to individuals for a specified period or for the rest of their lives.
9. Tax Benefits:
• Contributions to pension plans may be tax-deductible, and in some cases, the growth within the pension fund is tax-deferred until retirement withdrawals.

Pensions play a crucial role in retirement planning, providing financial stability and support for individuals after they stop working. The structure and features of pension plans can vary widely based on the country, employer policies, and the type of pension plan in place.