“Superannuation” means what?

17 Dec



“Superannuation” means what?

Superannuation, sometimes called ‘super’, is a special way of saving to provide yourself with an income when you retire.
While there are other ways of saving for retirement, superannuation saving is different because it is linked with your employment.
Your employer may be required to make superannuation contributions on your behalf to a special fund called a superannuation fund. These funds are special because if they meet certain Government rules, they may pay less tax than if you were to put the money in a bank account. There are more tax benefits for you when you retire.

Or in other words

Simply it is a pension scheme,(where normal Pensions are not available). 15% basic salary is contributed by the employer to this scheme and most of the places LIC Group Insurance department manages these schemes.

Supperannuation as described above can be a tax saving measure and a forced saving every month. you will get interest as per market rate on this too. but to get this benefit, one must serve for 5 years, if that person resign before that, then the whole amount will be fore-fitted. also even if you complete 5 years and then resign, then you can not claim the whole amount refund and you can only get 1/3rd amount and rest of the 2/3rd amount will exist as a bond in LIC which will mature at your suppeannuating age.

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

Normally Companies do not extend the Superannuation benefits to all employees- but only to a specific category of employees – like for example Level-1 of Managers onwards..

Some facts about Superannuation –

a) It is a retiral benefit.
b) It is normally computed at 15% of the monthly basic salary. Hence if the basic is Rs.10,000 p.m., the Superannuation contribution will be Rs.1,500 per month.
c) The Company opens a Superannuation Fund with an agency like for example – LIC. Monthly contributions are made by the Company on behalf of the eligible employees. (There is no recovery from the employees).
d) This Fund is normally invested in Govt. securities / equity to get returns.
e) When the employee retires, he/she can normally (based on rules of the Fund), be eligible for 25% of the accumulated fund.
f) The remaining is moved to a annuity fund and monthly returns commuted as pension is paid to the employee.

Last Basic x 12 x 15%

What is the SuperAnnuation Amount ?

Interest Earned : This is interest paid by LIC every year on the contribution by employer .

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.

Steps for checking Superannuation balance online?

1. Go to licindia.com2. Register for a user id and password.

3. Login.

4. Click on ‘Group Scheme Details’ tab.

5. Click on ‘member’ radio button.

6. Get the group policy number for super annuation from your company’s payroll department and enter ” in the policy number text box and click ok. (Talk to your finance department for getting the group policy number , this will be unique for all the employees of a company).

7. It will ask for LIC Id no and Date of Birth fields.

8. To get LIC Id no, call LIC branch with which your employer has a super annuation account and inform that you are calling from your company and provide your name to the LIC official. They will give your LIC ID No.

9. Since most companies had not furnished the date of birth details to LIC, enter ’01/07/1960′ / ’07/01/1960′ (forgot the order, try both n check) in the date of birth field.

10. You will get the policy enrolled and you can click on the policy number to view the details. The details will contain the accumulated balance till the last financial year. It also shows contribution made by your employer i the current financial year.

Are you able to see Superannuation Balance for yourself ? Were you aware of it ? Please share with us on comments section . Also please share if you find any discrepancies with the steps .

Note : Some data for this post may be out of date , If one comes to know about it , please let us know ,so that I can make the changes .


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Posted by on December 17, 2012 in Statutory Compliance


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