Superannuation Scheme - Group Superannuation Policy & Plan for Employees

> The Benefits of Group Superannuation Insurance
> Quick Guide to Group Superannuation Insurance
> Frequently Asked Questions
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The Benefits of Group Superannuation Insurance

Better Returns

Under Group Superannuation scheme, the funds are invested scientifically and meticulously. Your funds are a well-researched mix of equity and debt. Since your fund is invested wisely, you are likely to get better investment returns. This will ultimately contribute to your employee’s long term financial goal or savings for their retirement years. Group Superannuation schemes are always fruitful in the long run.

Annuity Option

Pension plans for the employees, under Group Superannuation scheme, help in taking care of their retirements. Also, Group Superannuation plans allow multiple payout options yearly, half yearly, monthly, or quarterly. You can also buy annuities that return the premium to nominees in case of death, amounts are guaranteed for as long as you live or even options to increase in annuity benefit each year.

Nominal Cost

Superannuation scheme has the advantage of extending benefits to employees at a nominal cost. Employees can have a sizable corpus without you bearing a significant and hefty cost. The primary benefit is that a superannuation scheme encourages all the employees to save each month. This is a discipline that can result in large retirement savings for them - something that your employees will be grateful for.

Tax benefit

The employer’s contribution is treated as a business expense which reduces your tax incidence. Employees also benefit because the fund is not treated as a perquisite for the employee, which is tax efficient. Moreover, the contribution by the employee towards this policy is eligible for deduction under section 80C. Also, the benefits payable on death and the amount accumulated on maturity are exempt from tax.

Quick Guide to Group Superannuation Insurance

Definition of Group Superannuation

Group Superannuation plans are Pension benefits that an employer can choose for their employees’ benefits, that provide retirement benefits to the employees. This retirement benefit allows the employees to save a portion of their income, during their tenure of employment, to secure their future post retirement.

Benefits of Group Superannuation Scheme

For employees

Voluntary contribution towards a group superannuation scheme is eligible for tax deductions up to a maximum limit of ₹1.5 lakhs, in a financial year, under Section 80C
Death benefit under superannuation fund is tax-free
Interest earned for your superannuation fund is tax-free
After retirement, you can withdraw one-third of the fund accumulated under your superannuation account without having to pay any tax

For employers

Contribution made by the employer towards the employees’ superannuation fund is considered as tax deductible by the Income Tax Department.
The income generated by trusts which are self-managed of an approved superannuation fund is exempted from tax.

Functioning of Group Superannuation Plan

The organization contributes towards the group superannuation fund created for the employees

The employer can either manage the superannuation fund by their own trusts or open a superannuation benefit fund with any of the approved insurance companies or buy a superannuation product from an insurance company
The employer contributes a fixed percentage of up to a maximum of 15% of employees’ basic pay and dearness allowance towards an employee’s superannuation fund. Though contribution is made by employer, ideally superannuation is part of Cost to Company (CTC)
An employee may also opt to contribute towards their superannuation fund based on the clause in the chosen plan. At the time of retirement, the employee will be eligible to withdraw 1/3rd of the accumulated value and the rest will be credited as regular pension in defined or chosen intervals.
Superannuation funds are transferable and the employee can choose to transfer the funds towards the new employer’s superannuation scheme when changing jobs. If the new employer does not have a superannuation scheme, the employee can choose to withdraw the amount or retain it in the fund for retirement.

Eligibility of Group Superannuation Scheme

The minimum age of entry for a group superannuation scheme is 18 years
The maximum age of age of entry is 75 years
The maximum age at maturity of the superannuation scheme can be 85 years
The minimum group size for a new employer-employee superannuation scheme is 10
The is no limit for the maximum value of a group size

Types of Group Superannuation Scheme available

In India, superannuation plans come mainly in two types:

For accumulating retirement savings
For generating pensions after retirement

The common annuity options that are available are:

Annuity payable for life
Annuity payable for 5years/10years/15years life guaranteed
Annuity payable for life with a capital return
Annuity payable jointly on the life of husband and wife

Claim process for Group Superannuation Scheme

Superannuation pension plan is a fund managed by the employer. The claims to these funds can only be made in the mentioned scenarios and the funds In India, superannuation plans come mainly in two types:are transferred as per the below details.

If the employee dies during their service - the nominee of the employee receives the accumulated fund
If the employee changes their job – the employee can
a. choose to transfer the accumulated fund to the new employer, if the new employer has a superannuation fund
b. continue using the same fund for accumulation of wealth till they retire
c. withdraw 1/3rd of the accumulated wealth and get the rest of the amount as pension on retirement
If the employee discontinues working or retires - they can choose to withdraw 1/3rd of the accumulated wealth and get the rest of the amount as pension on retirement

Documents required for Group Superannuation Scheme

Documents submitted for claims under group superannuation scheme differ by type of claim, the insurance company and the type of scheme taken. Below are a few general documents that are required to claim for a group superannuation scheme:

A duly filed and signed claim form, as prescribed by the insurance company
Original policy document
NEFT mandate for the claimant for direct transfer of money to the account
Proof of identity of claimant
In case of death of the insured – death certificate has to be produced by the claimant

Frequently Asked Questions

A group superannuation policy ensures that employees receive a pension or a regular stream of income after their retirement. It is basically a pension program declared by an organization for the future and long-term benefit of its employees. The accumulated fund is paid to the employee after his/her retirement from their service till his/her death.

An employee making a voluntary contribution towards a superannuation scheme is entitled for tax benefits up to a maximum of ₹1.5 lakhs under Section 80C. Similarly, contribution made by employers towards their employee superannuation fund is tax deductible as per Income Tax Department of India. Pension received would be taxable as per the regular income slab.

No. It is entirely up to the discretion of the employer to offer a superannuation scheme to their employee. Employers offer such schemes under employee welfare programs. It is a potent tool for employee retention as well as for attracting new resources to the company. Companies do have some mandatory provident fund requirements depending upon the size of the company and employee salaries.

A subscriber, under a superannuation scheme, can claim 100% withdrawal of the accumulated corpus if the accumulated value is less than or equal to ₹5 lakhs at the time of attaining the age of 60 years (time of superannuation).

An employee become eligible to withdraw their fund accumulated under a superannuation scheme in below conditions:

If the employee dies – the nominee receives the accumulated fund
If the employee retires – they can withdraw 1/3rd of the accumulated wealth and rest will be provided as regular pension in specified intervals
If the employee changes the organization – they can transfer the accumulated superannuation fund into the new employer’s scheme or choose to withdraw the whole amount if the new employer does not have a superannuation scheme

The types of annuity options available in India are:

Immediate Annuity – this is a type of annuity wherein the premium is paid lump sum and not periodically. But return is guaranteed and is paid at regular intervals.
Deferred Annuity – here, an individual is first required to build a corpus. This corpus will then be used to purchase annuity at the time of retirement.
Fixed Annuity – a fixed annuity allows an individual to obtain a fixed payout which is the same throughout the time frame of the payment. This framework ensures fixed income to the individual after their retirement.
Variable Annuity – this offers a variety in the annuity payouts. So, payouts can be modified in the middle of one payout and the following, based on the market execution of the investment made with the pension or annuity fund.

Minimum amount of investment into a superannuation scheme depends on the contributor. Some insurance companies have a minimum allowed contribution value towards their superannuation schemes for example, Rs. 5,000 per year. Generally, there is no capping on maximum contribution that can be made towards a superannuation fund.

Life insurance plans associated with group superannuation insurance schemes are quite cheap. For instance, a superannuation fund bought from LIC that will also provide life insurance costs under ₹2000 per member. Life insurance covered in a group superannuation fund is an additional coverage and your employer has to opt for it.

Fund Management Charges – these are the charges deducted from the policy account at the end of each quarter or at the time of exit. Fund management charges vary with the size of the group superannuation insurance policy.
Market Value Adjustment – this is levied on the bulk exit and the complete surrender of a group superannuation plan.
Policy Administration Charges – this is charged by the insurance company towards maintenance of the group superannuation policy such as: paperwork, premium intimation and so on.
Surrender Charges – these are charges levied on the policyholder on grounds of leaving the group superannuation insurance scheme during the first three years except for reasons such as death, disability, etc.
Service Tax Charges – these charges, if exist, shall be borne by the master policyholder and this may vary with the time and government regulations.
Switching Charges – these charges are applicable in case a member decides to switch from one fund to another. In such case, a certain percentage of the fund will be charged as switching charges. Insurers provide a limited number of free switches in a year.

Group superannuation schemes are not available online.

Yes, it can be. Many insurance companies provide the facility wherein you will be able to check your superannuation benefit details as well as accumulations online.

Only a few leading insurance companies provide a group superannuation scheme. Some of the trusted insurance providers are: LIC of India, Future Generali, Reliance and ICICI.

An employee, as part of a group, can be benefitted from the group superannuation scheme set up by the organization. And simultaneously own a self-managed superannuation scheme and still reap benefits out of both of the policies.

In certain circumstances you can avail your superannuation fund before you retire:

If you’re unable to work because of medical conditions
If you’re not able to meet your living expenses
If there are valid unpaid expenses that need to be paid out
If you suffer with terminal illness or injury

It takes at least 4-6 weeks to set up a superannuation scheme. The employer plans on creating a group superannuation fund, so they have to contribute to the fund on the behalf of the employees. Organizations can choose either to manage superannuation funds by their own trusts or to open a superannuation benefit fund with an approved insurance company or even buy a dedicated group superannuation product from insurance companies.

Below are the scenarios to make claims for the superannuation insurance plan’s accumulated funds:

If the employee retires from their service, they are eligible to receive the fund accumulated as part of their superannuation benefits or superannuation allowance
If the employee discontinues working at some point in time, they can withdraw 1/3rd of the accumulated superannuation fund’s wealth and get the rest of the amount as pension on retirement

In case a policyholder of a group superannuation insurance plan dies in service then the nominee is eligible to receive the accumulated sum. The process involves:

Filling a duly filled and attested copy of the claim form, as provided by the insurance company
Death certificate of the policyholder
Police copy and other required documents in case of accidental death
Canceled cheque or bank passbook that clear shows name of the claimant, for direct transfer of funds
Valid ID proof

Insuropedia

Superannuation benefit plans in India

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8 Rules of Group Superannuation Policies all employees should be aware of

Most employees keep on planning and restructuring their savings to reap its benefits after retirement, but they are not aware of a benefit that they are automatically eligible to if they are working in a company for at least more than a year...

What are the various expenses applicable in a Group Superannuation plan and how do they apply?

There are various expenses or charges levied on a group superannuation plan, which need to be paid. Have a look at some of the expenses/charges applicable in the plan –

Fund Management Charges – These are those charges which are deducted from the policy account at the end of each quarter or at the time of exit. Here, it is important to note; these charges vary as per the size of the group superannuation insurance...

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Group Superannuation Scheme

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