Group Superannuation

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Employee retention is a constant concern for organisations. A group pension plan can help in this goal. It suggests the organisation’s long-term interest in the welfare of its employees.

Thus, a group pension plan is a good investment for an organisation. However, picking the ideal group pension plan for your organisation can be confusing. This post offers some tips.

What to look for in a pension plan?

When subscribing to a group pension, there are many factors you need to consider to ensure a healthy retirement solution for your employees. We list some important factors below.

Official approval

One advantage of a group pension plan is that contributions are eligible for tax deductions. However, unless the Income Tax Commissioner approves the superannuation plan, contributions made to it will not be eligible for tax deductions.

The financial health of the provider

Usually, life insurance companies provide group pension plans. The Insurance Regulatory and Development Authority (IRDA) examines the financial wellbeing of these companies in its annual report. To check if your provider is financially sound, check their solvency ratio. Lawfully, your provider’s solvency ratio should be more than 2.5. However, you might want to choose an insurer with a higher ratio.

Administrative expenses

This refers to the direct cost of maintenance and investment that the provider deducts from the annual contributions of the plan. A higher administrative cost means lower benefits for your employees but may also mean better service for you. Therefore, it’s important to strike a balance here.

Choice of pension

Although it may be lucrative to use a group pension plan to offer the employee a lump sum payment at the time of retirement, it might not always be in their best interest. It is better if the employees can choose how they wish to receive their retirement accumulation, i.e., like a monthly pension, etc.

Pension to beneficiary/life cover

You may have a group term life cover for your employees, but if you do not, you can check if life cover can be added to the pension plan. In fact, this may even be compulsory for employers liable for Employees’ Deposit-Linked Insurance (EDLI). This is not a must-have but one of the features you could consider.

Employee contributions

It is possible that at the time of buying the plan, you want to limit contributions so that only the organisation pays. However, later, employees might also wish to contribute to their pension. So, the insurer should have an option to allow this under the same scheme. In such cases, the scheme will become a ‘contributory pension fund’.

Case study: Group superannuation products

M/S Mistry Ltd. wanted to offer its employees a group superannuation plan and examined multiple offers from different insurance providers. Almost all of them were pension plans that had the approval of the Income Tax Commissioner. However, the company director, Mr. Swarup Kahuna, worried about management costs.

His CFO Rajeev Mittal had some suggestions. He said that the company should look for pension choices, contributory status, and the insurer’s past financial performance. All these would have a direct effect on the pension outcome at retirement. Additionally, he suggested that the company should look for a life cover that could offer support to families in the event of an employee’s untimely demise.

About The Author


MBA Finance

With seven years of experience in the insurance industry, Trisha is a recognized expert in group superannuation. As a dedicated writer for SecureNow, she crafts insightful blogs and articles that clarify the complexities of group superannuation schemes. She is passionate about educating businesses on the benefits and management of retirement plans, making technical details accessible and practical. Their deep understanding of superannuation regulations and best practices ensures that readers receive up-to-date and valuable information, establishing Trisha as a trusted voice in the insurance community.