SUPER ANNUATION SCHEMES

Superannuation
superannuation refer to a pension granted upon retirement In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions.

 Superannuation is a retirement Benefit by employer . It is a contribution made by employer each year on your behalf towards the group superannuation policy held by the employer. This is an important part of creating wealth for your retirement.

 Superannuation Fund is a retirement benefit given to employees by the Company. Normally the Company has a link with agencies like LIC Superannuation Fund, where their contributions are paid. The Company pays 15% of basic wages as superannuation contribution. There is no contribution from the employee. This contribution is invested by the Fund in various securities as per investment pattern prescribed. Interest on contributions is credited to the members account. Normally the rate of interest is equivalent to the PF interest rate.

 On attaining the retirement age, the member is eligible to take 25% of the balance available in his/her account as a tax free benefit.

The balance 75% is put in a annuity fund, and the agency (LIC) will pay the member a monthly/quarterly/periodic annuity returns depending on the option exercised by the member. This payment received regularly is taxable.
In the case of resignation of the employee, the employee has the option to transfer his amount to the new employer. If the new employer does not have a Superannuation scheme, then the employee can withdraw the amount in the account, subject to deduction of tax and approval of IT department, or retain the amount in the Fund, till the superannuation age.

 TWO TYPES OF BENEFITS - ADVANCE FIXATION OF BENEFITS AND MONEY

PURCHASE SCHEME. EVERY COMPANY IS SUBSCRIBING TO MONEY PURCHASE SCHEME (WITH THE FIXED PERCENTAGE OF CONTRIBUTIONS PER MONTH TRANSFER FROM PREVIOUS EMPLOYER CAN ALSO BE RECEIVED (TAX FREE).

TRANSFER TO OTHER'S TRUST CAN ALSO BE PAID (TAX FREE).

NEW EMPLOYER CAN HAVE MINIMUM MANDATORY SERVICE CLAUSES FOR THEIR OWN CONTRIBUTION BUT THEY CANNOT TOUCH PREVIOUS TRANSFERRED FUNDS. 15% CONTRIBUTION TAX FREE IS THE BIGGEST TOOL OF TAX PLANNING. EMPLOYEES IN THE HIGHEST BRACKETS ARE MOST BENEFITED. NOT ONLY CONTRIBUTION IS TAX FREE BUT THE INTEREST @ 12% IS TAX FREE. 12% TAX FREE INTEREST IS EQUAL TO 18% TAXABLE INTEREST.

 Rules of Superannuation on Maturity Once the employee completes 3 years of service and works till his/her retirement, he/she can make use of superannuation balance as a form of pension. He/She can withdraw 1/3rd of the accumulated balance after retirement and the rest can be availed as monthly pension till end of life.