You sign a contract and write a lump-sum check (or transfer monies from another institution) to an insurance company. The insurer invests the money and guarantees to pay you a predetermined fixed dollar amount (on a recurring basis) for the rest of your life. You do not receive your lump-sum back. You receive the fixed dollar amount (income stream) for the balance of your life. A pension is an income annuity. You receive monthly payments for the balance of your life but you never have access to the principal amount.