Superannuation refers to the retirement benefit offered to the working class. In India, there are two types of superannuation benefits:
- Defined Benefit Plans: These schemes have a defined benefit which is fixed and known to the employees based on their service, rank and final salary. These are more popular among the employees, since regardless of their contribution to the plan they are entitled to the pension.
- Defined Contribution Plans: These schemes are better to manage as the final benefit is directly correlated with the contributions by employers and employees. The scheme only defines the contribution of both and leaves the outcome to the market forces. Most of the modern pension schemes are defined contribution plans.
The Superannuation Benefits in India
Following are some of the ongoing schemes which offer to make retirement of Indian working class financially stable:
- Plans for Accumulating Retirement Savings:
- National Pension Scheme
- Public Provident Fund
- Atal Pension Yojana
- Plans for generating pension after Retirement:
- Life Annuities
- Monthly income plans
Case on Superannuation Benefits in India
Kapil Mehta, is retiring from DSK Enterprise this year, after 15 years of exceptional service record. He has been entitled to many retirement benefits applicable to a listed company in India. He will receive gratuity, provident fund proceeds. He is also entitled to pension under the Employee Pension Scheme, as the organization had been a part of EPF from its early days.
Overall, he has a good lump sum amount to start on the golden years of his life. While, his son who started working for a startup three years back, is now subscribing to NPS, on insistence of Kapil, since NPS offers higher growth and better tax benefits than EPF. Not only that Sumit’s (Kapil’s son) organization has not yet subscribed to any retirement schemes as most of its workforce consist of consultants.
Even if Sumit’s organization subscribe to EPF or NPS, it will not be compulsory for them to contribute for Sumit as his basic pay is higher than Rs. 10,000 p.m. and he can choose to continue his NPS account without connecting it to his employer. But the contributions to the Tier I account will certainly ensure a comfortable retirement for him at the age of 60.
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