Tuesday, May 21, 2024

What is Group Superannuation Scheme and its Advantages for Employees?

Employers offer their employees additional welfare benefits besides salary compensation. These benefits include gratuity, provident fund, group insurance policy for employees, etc.

Especially when it comes to retirement benefits, employers give their employees suitable pension payments so that they can live out their retired life comfortably. The provident fund is one such component of retirement planning that employers offer employees. Another benefit is the group superannuation scheme. Let’s understand what the scheme is all about.

Group superannuation scheme – the meaning :

The group superannuation scheme is a group life insurance retirement scheme for employees wherein employers pay employees pension benefits after retirement. Employers usually purchase a group superannuation plan from life insurance companies and then contribute to the scheme to build up a pension corpus for their employees.

Thereafter, as and when employees retire, the superannuation scheme pays pensions to the employees throughout their life.

Benefits and advantages of group superannuation scheme:

The group superannuation scheme is beneficial for employees. Let’s understand how –

  1. Pension income post-retirement:

The primary benefit of a group superannuation scheme is the promise of a pension income. When the employer invests in the scheme, employees are assured of a regular pension after their retirement. This pension creates a source of regular income and helps them lead a financially comfortable life.

  1. Lump sum withdrawal option for financial needs:

The group superannuation scheme offers employees the flexibility of withdrawing 1/3rd of the accumulated corpus on retirement. This is called the commutation of pension. Employees can commute and withdraw a part of their retirement corpus to meet their immediate financial needs.

  1. Security through a death benefit:

The group superannuation plan also acts as a group life insurance plan. It usually offers a death benefit if the employee dies before retiring. This death benefit can give financial security to the employee’s family in his absence.

  1. Tax benefits:

Under a defined superannuation scheme, employees can contribute a part of their salary to the scheme to build up their retirement corpus. This contribution by the employees earns them a tax benefit under Section 80CCC1 of the Income Tax Act. Contribution up to Rs.1.5 lakhs qualifies for the benefit.

Moreover, the commuted pension on retirement is also a tax-free benefit in the hands of the employees under Section 10(10A)2 of the Income Tax Act, 1961.  

Even employers can attract the right employees and boost morale and loyalty in the workplace through the group superannuation scheme. Moreover, the employer’s pension payment is taken care of by the scheme, ensuring that the company does not incur major financial expenses when the employees retire and the pension becomes due.

The bottom line

The group superannuation scheme is, thus, a suitable group insurance policy for employees. It helps employers to create a source of pension for their retiring employees as well as for employees to enjoy regular incomes even after retirement. Understand what the scheme is about and check if your employer has invested in the scheme to secure your retired life.

Alternatively, you can opt for an individual comprehensive term life insurance plan to provide adequate coverage to your family. The premium for the same can be easily calculated with the help of the term insurance premium calculator.


  1. What are the types of superannuation benefits?

There are two types of superannuation schemes –

  1. Defined contribution scheme

Under this scheme, the contribution by the employer and the employee is fixed. The pension amount depends on the amount of contribution made and the returns earned on the same.

  1. Defined benefits scheme

Under this scheme, the amount of pension is fixed. Based on this amount, the contribution amount is determined. 

      2. Does the employer contribute to the superannuation scheme?

Yes, the employer contributes to the group superannuation scheme. In some schemes, the employees can also contribute to supplement their retirement corpus and get an enhanced amount of pension. 

      3. Can the scheme be transferred in the case of a job change?

Yes, you can transfer the group superannuation scheme to a new employer in the case of a job change. However, in such cases, the new employer should also be ready to accept the transfer of the scheme. 

Editorial Team

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