LIC’s New Group Superannuation Cash Accumulation Plan
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 is a major 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 :-
Create a privately managed trust fund and as and when a member retires, purchase annuity from LIC to provide pension for such retiring member.
Entrust the Management of the Pension Fund to LIC by purchasing its Group Superannuation Scheme.
Security:-
The most important aspect above all is SECURITY OF THE FUNDS INVESTED since these are EMPLOYEE WELFARE FUNDS. Funds invested with the Corporation (LIC) enjoy SOVERIGN GUARANTEE of Central Government of India and the same is expressly provided under Section 37 of the LIC of India Act, 1956, passed by none other than Parliament of India, i.e. 100% security of Funds invested with LIC.
Liquidity:-
Life Insurance Corporation of India is a financial power house and can ensure 100% liquidity of the funds invested.
Surrender of The Scheme:-
Low surrender charges only within three year from date of commencement shall be 0.05% subject to a ceiling of Rs 500,000/-
Superannuation Scheme Provided by LIC
The employer contributes a certain fixed percentage of salary towards Superannuation Fund. Such Contributions are accumulated by LIC and the accumulated amount is utilized to provide various benefits as mentioned below.
BENEFITS
ON RETIREMENT
On Retirement of a member, the corpus (contributions plus interest) is utilized to provide the following:-
Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free.
The corpus that remains after providing for the commuted value is taken as the purchased price to provide for pension.
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.
ON WITHDRAWAL
He can get the equitable interest transferred to the Superannuation Scheme of the new employer provide the rules of both the Schemes provide for the same.
He may opt for a pension from the normal retirement date as provided in the old employer’s scheme.
He may opt for payment of commuted value and pension, immediately in which case the benefits would be taxable.
PENSION OPTIONS PROVIDED BY LIC
Life Pension ceasing at death
Life Pension with Return of Capital and Group Pension Terminal Bonus on death.
Life Pension guaranteed for 5,10,15 or 20 years and life thereafter.
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 upto him to decide to which class/ classes of employees he desires to extends 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).
CONTRIBUTION
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 if so desired, both the employer and the employees may contribute, in which case the scheme is called a Contributory Pension Fund Scheme.