Group Superannuation Scheme:
An organization today, has not only to man the various positions with competent and trained personnel but also has to create an environment wherein they can give their best and derive a sense of well-being, a sense of fulfillment and security and take pride in their continued association with the organization.
Provision of pension may be an attraction for such persons to continue in the organization and give their best to the organization, as with continuous improvement in longevity a regular income even after retirement has become a necessity.
To provide the pension benefits to employees, an employer has two alternatives under the provisions of Rule 89 of Income Tax Rules 1962.
Advantages of the LIC Managed Pension Fund
The LIC managed Pension fund has the following added and distinct advantages.
Superannuation Scheme Provided by LIC
The employer contributes a certain fixed percentage of salary. Such Contributions are accumulated by LIC and the accumulated amount is utilized to provide various benefits as mentioned below.
1) On Retirement
On Retirement of a member, the corpus (contributions plus interest) is utilized to provide the following:-
2) On Death
The Pension is payable on the life of the beneficiary. Corpus is utilized towards the payment of pension of the type the beneficiary may opt and the benefit so received is tax free. A lump sum is payable in case of death besides the pension, if the employer has taken Group Insurance Scheme in conjunction with the Group Superannuation Scheme.
3) On Withdrawal
Pension Options Provided By Lic
It is not obligatory or statutory on the part of the employer to provide for pension to all employees. It is entirely up to him to decide to which class/ classes of employees he desires to extend the scheme.
The eligibility conditions may be defined on the basis of designation or salary. (However, after the categories are specified, employer cannot discriminate between the employees and thus extends the scheme uniformly).
The number of years of service an employee has to put in to become eligible for pension is also to be decided by the employer.
The maximum annual contribution that an employer can make to the Pension Fund and Provident Fund is restricted by the Income Tax Provisions to 27% of the annual salary (basic plus D.A.) The annual contributions are treated as deductible business expenses.
Who Pays Contribution
Mostly the employer contributes, but is so desired, both the employer and the employees may contribute, in which case the scheme is called a Contributory Pension Fund Scheme.
How Is The Scheme Installed
The employer is required to take the following steps to install the Scheme:-
Group Insurance Scheme In Conjunction With Superannuation Scheme.
The members of the Group Superannuation scheme can be covered under Group Insurance in conjunction with superannuation scheme so as to provide death risk cover while in service provided the minimum membership under the Scheme is 10.
Group Size, Scale Of Cover And Max. Limit Of Cover
10-49 – 2 months salary for each year of future service on death 1.75 lakhs
50-99 – 2 months salary for each year of future service on death 3.00 lakhs
100 & more – 2 months salary for each year of future service on death 4.00 lakhs
For more information and execution of the scheme, please feel free to contact
Karunanidhi B.Sc., FChFP
Chief Life Insurance Advisor
LIC of India, Tatabad Branch,
Coimbatore – 641 012
98430 – 65776