SAB ka Sath SAB ka Vikas
SAB Superannuation benefit
What is a 'Superannuation'
Superannuation is an organizational pension program created by a company
for the benefit of its employees. It is also referred to as a company
pension plan. A pension plan is a
retirement plan that requires an employer to make contributions into a
pool of funds set aside for a worker's future benefit. The pool of funds
is invested on the employee's behalf, and the tax
on the investments generate an income benefit to the worker upon
Funds deposited in a superannuation account will grow typically without
any tax implications until retirement
means when a person chooses to leave the
workforce. The concept of full retirement – being able to permanently
leave the workforce in old age – is relatively new and for the most part
only culturally-widespread in first-world countries. Many developed
countries have some type of national pension or benefits system (i.e.
the United States' Social Security system) to help supplement retirees'
As funds are added, by employer (and potentially employee) contribution
and other traditional growth vehicles, the funds are reserved in a
superannuation fund. This form of monetary fund will be used to pay out
employee pension benefits as participating employees become eligible. An
employee is deemed to be superannuated upon reaching the proper age or
as a result of an infirmity. At that point, the employee will be able to
draw benefits from the fund.
A superannuation fund differs from some other retirement investment
mechanisms in that the benefit available to an eligible employee is
defined by a set schedule and not by the performance of the investment.
Understanding Defined-Benefit Plans
As a defined
superannuation supplies a fixed, predetermined benefit depending on a
variety of factors, but it is not dependent on market performance.
Certain factors may include the number of years the person was employed
with the company, the salary received by the employee, and the exact age
at which the employee begin to draw the benefit. Employees often value
these benefits for their predictability. From a business perspective,
they can be more complex to administer, but they also allow for larger
contributions than some other employer
Upon qualifying for retirement, the eligible employee receives a fixed
amount, usually on a monthly basis. The amount is determined by a
preexisting formula. The function of a superannuation, in that regard,
is similar to receiving social security benefits upon
reaching the qualifying age or under qualifying circumstances.
Difference from Other Investment-Based Retirement Plans
While superannuation guarantees a specific benefit once the employee
qualifies, other traditional retirement vehicles may not. While
superannuation is not affected by individual investment choices,
retirement plans such as the 401(k) may
be affected by positive and negative market fluctuations. In that sense,
the exact benefit from an investment-based retirement plan may not be as
predictable as those offered in superannuation.
A person on a defined-benefit plan should not have to be concerned with
the total amount remaining in the account, and is at a low risk of
running out of funds prior to death
PRC ON PENSIONS - Issues in Retirement Benefits
of the II PRC in November, 2006 by GOI
• Justice M.J.
Rao, retired Supreme Court Judge was the Chairman of Committee.
gave its recommendations after 18 months, i.e.in May, 2008
recommendations not accepted by GOI
• On basis of
agreed recommendation orders were issued by DPE
26.11.2008 & 9.2.2009
of Committee of Ministers (Chidambaram Committee)
• DPE O.M
guidelines for Superannuation Benefits
its O.Ms. dated 26.11.2008 and 2.4.2009 provided inter-alia the
30% of Basic Pay plus DA as superannuation benefits.
Superannuation benefits may include Contributory Provident Fund (CPF),
Gratuity, Pension and Post-superannuation Medical Benefits.
should make their own schemes for managing these funds or to operate it
through Insurance Companies, on fixed contribution basis.
and gratuity to be provided for as per the statute.
Pension and Post-retirement medical benefits scheme will be decided
based on the returns from the schemes to be operated.
Schemes would be subject to factors like affordability, capacity to pay
and sustainability of the CPSE. This scheme will be available for
regular employees on the roles of the CPSE after 1.1.07 or date of
starting the scheme in the CPSE.
Govt. budgetary support would not be
provided to operate or sustain these schemes
• Dip in
profit not to exceed 20% of PBT on pay revision with pension scheme
may be given the option to contribute.
Contribution of a CPSE to these two schemes to be limited such that the
contribution to PF, Gratuity, Pension and Post-retirement medical
benefit schemes does not exceed 30% of Basic Pay + DA.
Contribution every year should not be guaranteed.
Contribution to individual accounts for these two schemes will vary
depending upon affordability.