Looking at the Group Superannuation Scheme and its Advantages for Employees

The last few years have seen a rise in the number of specialised group insurance plans offered by insurers. The most common plan remains the group life insurance policy. What is group life insurance? It is a plan that insures the life of several people under one policy, while the premium is collected from each individual for the coverage they receive.

Similar forms of group plans, specially designed for corporations, exist for the ease of employee-employer groups. The group superannuation scheme is one such kind of group plan. This particular kind of group plan is concerned with retirement planning. It is a pension plan that aims to provide a regular income flow to employees once they retire. Let’s learn more about the superannuation scheme and how it can be beneficial.

How does the group superannuation scheme work?

Group superannuation schemes are opted for by corporate organisations, mostly. In such a plan, the employees pay a particular amount from their income toward the plan during their employment years. Similar to group life insurance plans, this premium is deducted from the salary of the covered employees. These premiums are accumulated and invested by the insurer and provided to them with the appropriate returns.

In many cases, the employer manages the scheme themselves. However, the ideal option would be to let an experienced insurer take charge.

Benefits of group superannuation scheme for employees

Every group insurance plan has its benefits. While a group life insurance plan provides life coverage, a group superannuation scheme ensures the following benefits:

  • Financial assurance during post-retirement years 

Retirement planning is an important element of any financial portfolio. One needs the assurance that one will have a good post-retirement lifestyle. However, the process of planning for the same can be quite intimidating. With a group superannuation scheme, you are relieved of the worry of managing your entire retirement plan. You have to participate in some of the processes, but the rest will be taken care of by the employer.

  • Tax benefits 

The contribution that you make towards the group superannuation scheme is eligible for tax deduction up to Rs 1.5 lakhs as per Section 80C of the ITA, 1961. So, not only are you saving up for retirement in a hassle-free manner, but you are also getting the benefit of tax deductions similar to life insurance. Depending on the kind of coverage you are receiving, you may be eligible for more tax benefits.

  • Hassle-free entry and exit 

You can become a part of a group superannuation scheme simply by joining an organisation that offers such a plan. To be eligible for these schemes, you must be over 18 years and under 75-80 years of age.

When you leave the organisation, you can transfer your funds to the group superannuation scheme at your new company, if such an option is available. If not, then you can either withdraw it or keep it in the fund for retirement. The terms and conditions regarding this are mentioned in the policy wordings. If there was a life coverage element to the plan, then you can consider buying a separate life insurance policy to secure the future of your loved ones.

Besides these, there are some considerable benefits for employers as well.

Benefits of a group superannuation scheme for employers

  • Tax benefits 

The contribution that the employer makes towards the group superannuation scheme is regarded as business expenditure. Thus, it is not taxed as per prevalent tax laws.

  • Stable returns 

By choosing the right kind of policy, you can ensure that the funds receive a good amount of returns. As per your requirements, you can choose between equity, debt, or a bit of both. Regular payment of premium ensures that the funds are constantly invested and accumulate returns that meet your employee’s retirement goals.

  • Employee retention 

Group insurance plans are an effective way to retain employees without incurring high costs. Employees benefit from a collective retirement plan since it saves them a lot of hassle. Hence, many people are unwilling to let go of such benefits as the employee only has to pay a certain amount of the contribution while the rest is borne by the employer.

Note that tax benefits are subject to amendments in tax laws. If you want to know more about what group life insurance is, or if it would be ideal to join a group superannuation scheme, then do consult a financial expert.