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The Pension Reform Act allows a retiree under the contributory pension scheme to choose between staying with a PFA or buying an Annuity product from a Life Insurance company. At the end of the day, the retiree gets paid on a monthly or quarterly basis his or her periodic pensions. Whereas these two products share some similarities, there are notable differences between them as well which we would like to explain below. 

Annuity Vs Program Withdrawal (PW)


1. Both products pay monthly or quarterly pension to retirees. 

2. Both enjoy tax benefits i.e. they are not taxed.

3. Both are jointly regulated retirement products by PenCom and NAICOM.


• A retiree on PW can opt out and buy an Annuity plan from an Insurance company but a retiree who has opted for Annuity at the beginning cannot choose PW later on.

• With Annuity, if a retiree dies before the expiration of the minimum guaranteed period of 10 years, his or her beneficiary will receive the pension benefits up to the guaranteed period of 10 years from the start of the Annuity contract. But if the death occurs after the guaranteed period, no payment is made to the beneficiary. On the other hand, a retiree beneficiary under the PW will receive whatever balance that is left in the RSA of the deceased retiree irrespective of the year of death. 

• A retiree under the PW has the opportunity receive minimum pension provided he or she has satisfied the \requirements to receive minimum pension under the CPS. But a retiree who has opted for Annuity cannot receive guaranteed minimum pension. This is because guaranteed minimum pension is under the regulation and control of PenCom while the Annuity product is under the regulation of NAICOM.

• A retiree on PW can have his or her monthly pension reviewed upward periodically in accordance with the directive of PenCom based on the fact that his or her RSA balance is also expected to grow as a result of profitable investment decisions being made continuously by the PFA on his or her behalf. On the other hand, Annuity payments are fixed and may not be reviewed upward.

• Annuity payments are relatively a bit higher than PW payments. This is understandable as Annuity product has a minimum guaranteed period while PW has no limit. 

• A Retiree under the PW can move  his RSA balance to another PFA in accordance with the transfer window guidelines after one year. However, a retiree who has opted for Annuity can also move to another provider only after 2 years.

• A retiree under the PW receives a periodic statement of account showing the balance in his or her RSA from the PFA but a retiree under the Annuity contract does not receive statement of account because the Annuity pool is not customized to an individual.

In conclusion, both Annuity and PW allows a retiree to draw monthly pensions which can last up to the entire duration of the retiree existence. They also have some striking differences which should be considered before opting for either options.

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