Retirement is the point where a persons stops employment completely (or decides to leave the labor force if (s)he is unemployed). Many persons choose to retire when they are eligible for private or public pension benefits. The term pension refers to regular installment payments a person receives upon retirement, usually under pre-determined legal and/ or contractual terms. A pension created by an employer for the benefit of an employee is commonly called an occupational or employer pension. Labour unions, the government, or other organizations may also fund pensions. A pensioner is one who is the recipient of a pension. Individuals may create there own ‘pension’ stream by purchasing annuities.

The normal retirement age for many pension plans in the Caribbean is 65 years and in some cases, earlier. With increasing life expectancy retirement savings are needed to support new retirees for significantly more years than for pensioners who retired say, 50 years ago. This means that pensions guaranteed for life could be paid for around 30 or 35 years before the pensioner dies and the size of the savings and reserves needed to sustain pensions for such a long period is much larger than most people think. This means that people should recognise from early in life the need to accumulate savings to build up enough to get a reasonable stream of income to support them in their old age.

Many countries and employers have increased the retirement age to reduce the pension payment period so reserves can accumulate for a longer period and more money is available to finance the pension as pensioners live longer. Annuities are important in order to meet lifetime household, transport and medical expenses, pay the property taxes and allow a reasonable lifestyle. If you are receiving a pension from a defined benefit type plan, then the pension fund undertakes the lifetime guarantee. If you are saving in a defined contribution type arrangement, then purchasing an annuity from an insurance company is the way to acquire the lifetime guarantee for payment.

Please note that the sufficiency of the pension to meet daily living expenses is better the longer you have been a member of a pension fund.

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