- Plan design and advice on Trust Formation/Deed of Variation.
- Actuarial valuation for Defined Benefit Scheme as per internationally accepted practices once in a year.
- Scheme registration and ongoing legislative compliance.
- Investment management and reporting to trustees.
- Administration services and benefit payments.
Superannuation schemes can be of two types:
- Defined Benefit (DB):
This defines the amount of benefit that an employee receives at retirement. Actuarial valuation is conducted to determine the funding rate. A pooled fund is maintained for all members of the scheme.
Upon retirement of a member, the amount required to secure the benefit is drawn from the pooled fund. The pooled fund should achieve the required funding level to enable the employer to meet the benefit obligations.
- Defined Contribution (DC):
This defines the annual contribution that the employer will deposit into the scheme for each employee. Contributions are usually fixed as a percentage of the employees’ salary.
Individual employee accounts reflecting the contributions and the interest accumulations are maintained. Upon retirement, the individual account is released to provide funds to secure the benefits under the scheme.
Eligibility
Superannuation is a voluntary scheme and the employer is free to define the benefits and the eligibility criteria.
Benefit Payments:
Upon the retirement of the member from employment or on cessation of employment, benefits, subject to the provisions of the company’s rules, can be utilised in the following manner:
Upon Retirement:
To provide for payment of the commuted value relating to the portion of the pension which the member may, in accordance with the Rules, elect to commute; and / or to purchase an annuity in accordance with the company’s Rules.
Upon Death:
To provide for payment of annuity/pension on the life of the beneficiary, in accordance with the Trust rules as framed by the company.
Upon Withdrawal:
- To transfer the value of vested benefits to another Superannuation Scheme, if permissible by Trust rules framed by the respective Trustees.
- To retain the value of the vested benefits under the policy and provide for a pension from the normal retirement date to the member or to the beneficiary in the event of death of the member prior to his retirement date.
- To provide for immediate payment of the pension benefit in accordance with Trust rules as framed by the company.
Pension Options :
The scheme allows
settlement of the retirement benefits through our single
premium immediate annuity option (with return of purchase
price). Tata AIG Life offers an open market option for
purchase of annuity.
As per the request of the policyholder, Tata AIG Life will arrange for the purchase of annuity contracts from any Insurance Regulatory & Development Authority (IRDA) approved annuity provider.
Tax Benefits under Income Tax Act, 1961:
- For the employer*:
- Annual contributions are treated as deductible business expenses u/s 36(1)(iv)
- Maximum ordinary annual contribution an employer can make is 27% (Provident Fund + Superannuation) of employee’s annual salary - Rule 87
- Entire income of the fund is tax free u/s 10(25)(iii)
- For the employee*:
- Entire income of the fund is exempt from tax u/s 10(25)(iii)
- Commuted value (up to 1/3rd or 1/2) is tax-free u/s 10(10A)(ii)/section 10(13) read with rule 90
- Benefits payables on death are exempt from tax u/s 10(13)
- Employer’s contribution exceeding Rs. 1 lakh per employee during the year is taxable as perquisite in the hands of employee u/s 17(2).
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