Group Superannuation Insurance
Group Superannuation Insurance is a retirement benefit plan where employers contribute to a fund, providing employees a pension or lump-sum payment.
- Retirement Savings
- Multiple Payout Options
- Investment Options
What is Group Superannuation Insurance?
Group Superannuation Insurance is a retirement benefit plan designed for employees, where employers contribute to a fund that accumulates over the employee’s service period. This fund is then used to provide retirement benefits to the employees in the form of a pension or lump-sum payment upon retirement or resignation.
Group Superannuation Overview
Group Superannuation provides retirement benefits offered by employers to their employees, allowing them to save a portion of their income during their employment. Offering such benefits through superannuation insurance enhances Employee Benefit Policies.
Categories of Superannuation Policies
Defined Benefit Scheme
In this scheme, the employer provides a specific retirement benefit based on the salary and years of service. The plan is funded by employer contributions only. It is also called Non-Linked Non-Participating Annuity Plans.
Defined Contribution Scheme
In this scheme, both employees and employers contribute towards fund accumulation. Contributions to the fund are proportional to the salary.
Categories of Superannuation Policies
Defined Benefit Scheme
In this scheme, the employer provides a specific retirement benefit based on the salary and years of service. The plan is funded by employer contributions only. It is also called Non-Linked Non-Participating Annuity Plans.
Defined Contribution Scheme
In this scheme, both employees and employers contribute towards fund accumulation. Contributions to the fund are proportional to the salary.
Key Features of Group Superannuation Insurance
Provides a systematic way for employees to save for their retirement with contributions from both employer and employee.
Contributions made by the employer are eligible for tax deductions under Section 36(1)(iv) of the Income Tax Act. The income earned on the contributions is also tax-free until the point of withdrawal, providing significant tax savings.
At retirement, employees can choose from various payout options such as a lump sum, annuities, or a combination of both.
The fund can be invested in various financial instruments, including equity, debt, or balanced funds, based on the employee’s risk appetite and investment goals.
Employers typically contribute a fixed percentage of the employee’s salary to the superannuation fund.
Employees can transfer their superannuation benefits to a new employer if they change jobs, ensuring continuous accumulation of retirement benefits.
Benefits of Group Superannuation Insurance
For Employees
- Financial Security Ensures a steady income post-retirement, providing financial stability.
- Tax Advantages Contributions and earnings in the fund enjoy tax benefits, reducing the overall tax liability.
- Long-term Savings Encourages disciplined saving habits among employees for their retirement years.
For Employers
- Employee Retention Acts as a valuable tool for retaining employees by offering them long-term benefits.
- Tax Benefits Contributions made by employers are considered business expenses and are tax-deductible.
- Enhanced Employee Morale Demonstrates the employer’s commitment to the long-term welfare of their employees, boosting morale and loyalty.
Tax Benefits in Group Superannuation Insurance
Tax Deductibility
Contributions made by the employer towards the superannuation fund are treated as business expenses and are deductible under Section 36(1)(iv) of the Income Tax Act.
Income Exemption
Any amount received by the Trust (Fund Administrator) on behalf of the approved Superannuation fund is exempt under Sec 10(25)(iii) of the Income Tax Act.
Contribution Limits
The amount of deduction available under any ordinary superannuation fund shall not exceed 27% (including Provident Fund contribution) of the employee's basic salary for each year of service under Section 36(1)(iv) of the Income Tax Act 1961.
Section 80C Deduction
Employees' contributions towards an approved superannuation fund are eligible for deduction under Section 80C.
Tax-Free Payouts
The payment received from the superannuation fund is tax-free, subject to conditions under Section 10(13).
Tax Benefits in Group Superannuation Insurance
Tax Deductibility
Contributions made by the employer towards the superannuation fund are treated as business expenses and are deductible under Section 36(1)(iv) of the Income Tax Act.
Income Exemption
Any amount received by the Trust (Fund Administrator) on behalf of the approved Superannuation fund is exempt under Sec 10(25)(iii) of the Income Tax Act.
Contribution Limits
The amount of deduction available under any ordinary superannuation fund shall not exceed 27% (including Provident Fund contribution) of the employee's basic salary for each year of service under Section 36(1)(iv) of the Income Tax Act 1961.
Section 80C Deduction
Employees' contributions towards an approved superannuation fund are eligible for deduction under Section 80C.
Tax-Free Payouts
The payment received from the superannuation fund is tax-free, subject to conditions under Section 10(13).
Why Choose Group Superannuation Insurance?
Structured Retirement Plan
Provides employees with a well-structured retirement plan, ensuring they have sufficient savings for their retirement years.
Professional Fund Management
The fund is managed by professional fund managers, ensuring optimal returns on the contributions.
Customizable Options
Employers can customize the plan according to the needs of their employees, offering flexibility in contributions and investment choices.
How Group Superannuation Insurance Works
Setting Up the Plan
The employer sets up the superannuation plan with an insurance provider or a trust.
Contribution
Regular contributions are made by the employer, and optionally by the employee, to the superannuation fund.
Investment of Funds
The contributions are invested in various financial instruments as per the chosen investment strategy.
Accumulation
The funds accumulate over time, earning returns on the investments made.
Payout at Retirement
Upon retirement, the employee receives the accumulated funds in the form of a lump sum, annuity, or a combination of both, as per the plan's provisions.
How Group Superannuation Insurance Works
Setting Up the Plan
The employer sets up the superannuation plan with an insurance provider or a trust.
Contribution
Regular contributions are made by the employer, and optionally by the employee, to the superannuation fund.
Investment of Funds
The contributions are invested in various financial instruments as per the chosen investment strategy.
Accumulation
The funds accumulate over time, earning returns on the investments made.
Payout at Retirement
Upon retirement, the employee receives the accumulated funds in the form of a lump sum, annuity, or a combination of both, as per the plan's provisions.
What are the Steps for Taking Group Superannuation Plan?
- Employer Creates a Trust: For administration of the fund under the Superannuation Plan.
- Finalize the Scheme: Decide whether to go with “Defined Benefit Scheme” or “Defined Contribution Scheme.”
- Discuss Investment Preferences: Discuss investment preferences and strategies with the Insurance Broker and Insurance Company.
- Contribute and Review: Contribute to the fund and review investment return and fund growth periodically.
FAQs about Group Superannuation Insurance
Who is eligible for Group Superannuation Insurance?
Typically, all full-time employees of an organization are eligible for the plan.
How are the contributions to the superannuation fund calculated?
Contributions are generally a fixed percentage of the employee’s salary, determined by the employer.
Can employees contribute to the superannuation fund?
Yes, employees can also make voluntary contributions to enhance their retirement savings.
What are the tax benefits of Group Superannuation Insurance?
Contributions made by the employer are tax-deductible, and the earnings on the fund are tax-free until withdrawal.
Can the superannuation benefits be transferred to a new employer?
Yes, superannuation benefits can be transferred to a new employer if the employee changes jobs.
What happens if an employee exits the organization having Defined Contribution Scheme-based Superannuation Plans?
The employee may transfer their scheme to the new organization if a similar scheme is available or withdraw from the fund, subject to tax provisions.
What happens if an employee dies under Defined Contribution Scheme-based Superannuation Plans?
The accumulated fund will be released to the legal heir of the deceased employee.
Is it legally compulsory for employers to take a Superannuation Plan?
It is not mandatory under law. Corporates provide these benefits to attract and retain talent in their company.
How are the superannuation funds managed?
The funds are managed by professional fund managers appointed by the insurance provider or the trust.
Secure Retirements, Strengthen Loyalty
Help your employees plan for a financially stable future with Group Superannuation Insurance from Go Insure India. This retirement benefit plan allows employers to contribute to a fund, ensuring employees receive a pension or lump-sum payout post-retirement. Build long-term trust and loyalty while securing their future.