What Are Superannuation Benefits?
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What Are Superannuation Benefits?

  • 22nd Nov 2021
  • 91

View Plans What Are Superannuation Benefits?

What Are Superannuation Benefits?

It is always a good idea to get started on retirement plans as early as possible. Generally, it becomes easier to begin this process as most companies offer a variety of retirement plans to their staff - either as a legal requirement or to keep employees for a prolonged period of time. Some good and common examples of retirement plans are provident funds, gratuities, the National Pension System, etc. Additionally, employees may get superannuation benefits from their employers as well.

The Basics Of Superannuation Benefits

A superannuation benefit is a type of retirement pension provided by a company to its employees. It is basically a superannuation scheme designed for the welfare of an organisation’s workers in the form of a pension plan.

Working Of Superannuation Scheme

This fund receives 15% of your base income from your company for the superannuation fund. It is a personal call as you are not obligated to allocate your money to this program as an employee. Despite the fact that the monthly sum is relatively small, it builds up a capital large enough to assist you in meeting your expenses after retiring. Employers typically purchase group superannuation plans from insurance firms that manage both individual and group accounts. The interest and profits earned by the insurer via fund investments are placed in your personal account and the interest rate is generally identical to provident fund rates.

In the event that you switch jobs, you have the option of transferring your superannuation fund to your future employer. If the new company does not provide a superannuation plan, you also have the option of withdrawing the fund or leaving it in the account until retirement, post which it can be taken out.

Benefits

Superannuation Types and Benefits

A superannuation fund has two key plans -

Defined Benefit Plans:

This implies that the benefit earned by this sort of superannuation fund is already defined irrespective of how much money is put into the scheme. The pre-calculated benefit is decided by a number of factors such as - the total number of years you have served for the firm, your income, the age at which you will start reaping the benefits, etc.

This is a somewhat tricky situation, and the employer bears the risk of providing compensation. In case you are eligible to receive this fund, it is a predetermined sum that you receive at periodic intervals after retirement. This sum amount is calculated by a pre-existing formula.

Defined Contribution Plans:

This plan is the polar opposite of a defined benefit plan. A defined contribution plan has a fixed contribution, and the benefit is proportional to it and the market forces. This type of superannuation benefit is simpler to manage, and you as the employee assume the risk since you are unaware of the amount you will get post-retirement.

Superannuation Fund and Income Tax Benefits

The employer and the employees both profit from the superannuation scheme with respect to tax savings as per the Income Tax Act of 1961. To be eligible for these superannuation benefits, the organisations’ superannuation scheme has to be authorised by the Commissioner of Income Tax.

To conclude, superannuation is a fantastic approach to ensure a financially comfortable retirement. It is critical to invest early in a superannuation scheme and use the superannuation fund to be at peace throughout the golden years of life in order to live the retired life you have always wished for.

- A Consumer Education Initiative series by Kotak Life

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