Because it is aimed at providing you with income, the majority of the fund is invested in bonds and government securities. The annuity seller has to guess how long you will you live and pays you an income accordingly. When you die the money stays with the annuity seller. Should you die very shortly after purchasing the annuity, this fact leads to a situation colloquially known as a 'Bummer'. The law currently requires a pension fund to purchase an annuity before you are 75.
Appreciation is one component of total return .
Payment of an income, in the form, say, of a dividend , is another. The process in which one bank rips off another one by selling it something at the wrong price. OK, that was a bit facetious, even if it's pretty accurate. It's the process by which small, local price differences in a share are exploited and thus evened out. The parent company is assumed to have some management input and is allowed to account for its share of the profits reported by the associate.