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MK Finserve > Group Superannuation

Group Superannuation

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.

  1. Create a privately managed trust fund and as and when a member retires, purchase annuity from LIC to provide pension for such retiring member.
  2. Entrust the Management of the Pension Fund to LIC by purchasing its Group Superannuation Scheme.

Advantages of the LIC Managed Pension Fund

The LIC managed Pension fund has the following added and distinct advantages.

  1. An attractive yield on the fund will be credited to Fund A/c. The rate of interest declared for the year 2008-2009 varies from 9.00% to 9.60% depending on fund  size.
  2. problem of liquidity gets automatically eliminated as soon as the fund is managed by LIC. 
  3. We conduct free actuarial valuations of the funds administered by us from time  to time.
  4. The Administration of the fund is carried out by us in a scientific manner and    claims are promptly settled.
  5. Group Insurance in conjunction with the Group Superannuation Scheme can be  taken by an Organization to provide for an attractive lump sum payment on the  unfortunate death of a member while in service, at very nominal cost.

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:-

  1. Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free
  2. The corpus that remains after providing for the commuted value is taken as the purchased price to provide for pension.

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

  1. He can get the equitable interest transferred to the Superannuation Scheme of     the new employer provided the rules of both the Schemes provide for the same.
  2. He may opt for a pension from the normal retirement date as provided in the old employer’s scheme.
  3. He may opt for payment of commuted value and pension immediately in which   case the benefits would be taxable.

Pension Options Provided By Lic

  1. Life Pension ceasing at death
  2. Life Pension with Return of Capital on death.
  3. Life Pension guaranteed for 5, 10, 15 or 20 years and life thereafter.
  4. Joint Life Pension payable on the last survivor of the employee and spouse.

Eligibility Condition

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:-

  1. Appoint Trustees (minimum 2) for administering the Scheme, draft the Trust deed and Rules in consultation with L.I.C. and execute the trust Deed to establish an irrevocable Trust.
  2. Get the resolution passed by the Board of the Company for opting for the L.I.C. Group Superannuation Scheme.
  3. Forward to L.I.C., the Master proposal Form duly signed by the Trustees, Employees data, satisfactory evidence of age of each employee, copies of Trust Deed and Rules and cheque towards payment of contribution.
  4. Trustees to open Bank account in name of the Trust and future contributions to be routed through trust.
  5. Make an application to C.I.T. for approval under Part ‘B’ of the Fourth Schedule the Income-Tax Act, 1961.

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