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Superannuation Scheme is effected by the Company to provide monthly pensionery benefits to its employees on retirement. Under the Income Tax Law, a Company can contribute to the maximum of 27% of the Basic Wages/Salaries for the Employees Benefit Schemes such as Provident Fund/ Superannuation Schemes. It can invest upto a maximum of 12% in Provident Fund Scheme (which is contributory) and balance 15% in Superannuation Scheme (which is non contributory). Superannuation Scheme provides two methods of calculating benefits to the employees. One method is to fix the amount of pensionery benefits in advance (called benefit purchase scheme) and the other is to contribute at a fixed percentage periodically (which is called money purchase scheme). The pensionery benefits are arrived at seeing the accumulated Credit balance of the member at the time of Superannuation (Retirement). The company can establish a trust to make investments as permissible under the law or the Superannuation policy may be taken from Life Insurance Corporation of India. On acheiving the date of superannuation , the member is entitled to get 1/3rd value of the benefits commuted tax free in Cash (in case gratuity is also paid) and 1/2 value of the benefits commuted in Cash (in case no gratuity is paid). He gets the pension calculated according to the balance sum standing to his credit after commutation through LIC of India only. A member, on retirement, is entitled to have 8 options for geeting pension from Life Insurance Corporation of India. These are detailed out briefly as under :Annuity options and Rates applicable to LIC's Superannuation Schemes: The table shows the annuity options and annuity per annum (payable monthly in arrear) corresponding to purchase price of Rs.1,000/-, according to the type of annuity and age of which pension vests :------------------------------------------------------------------------------------------------------------------------

Annuity per annum payable monthly vesting age Annuity Options

55 years 58 years 60 years -----------------------------------------------------------------------------------------------------------------------1 2 3 Annuity Payable for Life Annuity Payable for Life Guaranteed for 5 Years Annuity Payable for Life Guaranteed for 10 Years Annuity Payable for Life Guaranteed for 15 Years Annuity Payable for Life Guaranteed for 20 Years 134.20 133.20 131.00 138.30 136.80 133.50 141.60 139.80 135.40

4 5

128.40 126.00

129.90 126.90

131.10 127.50

Annuity for Life with Return of purchase price of Rs.1,000/- on death along with Group Pension Terminal Bonus Joint Life Rates Joint Life with return of purchase price (capital) demand




7 8

Depend on ages of both lives and can be supplied on demand Rates depend on ages of both lives and can be supplied on

We recommend 6th or 8th option in which case the member is entitled to receive back the Capital Sum in addition to the pensionery benefits. The difference between Capital Sum return option and others is very-very small say 10% in the monthly pension amount. It is explained in the following :If, for a member getting salary of Rs.1,000/- per month, contributions are paid at 10% of Salary, i.e., Rs.1,200/- per annum upto age 60, then, ignoring salary increases, the emerging monthly annuity will be as under:Term to Retirement for which cont. are paid Years 5 10 15 20 25 30 35 Accumulation of cont. at the age of 60 Rupees 8392 22789 47490 89867 162571 287305 501304 Monthly annuity for life with return of Capital Rupees 84 228 475 899 1626 2873 5013 Monthly annuity for life guaranteed for 15 years Rupees 92 249 519 982 1776 3092 5477 Monthly Annuity for life (Ceasing of death) Rupees 99 269 560 1060 1918 3390 5915

Note : This example is based on Cash Accumulation rate of Interest and Annuity rates in force at present. Benefits may vary on change in these rates.

We are however, enclosing a comparitive chart highlighting the advantages/disadvantages of going to LIC of India or managing the funds in house and purchasing the annuties through LIC at the time of Superannuation/Retirement of the member.