Superannuation fund is a retirement benefit provided by employer to employee. This is like EPF, however, the contribution from the only employer side is done. Many corporates have incorporated superannuation fund benefit as part of employee CTC. However, many employees might forget about such benefit during a change in jobs. Some would have moved from job to business and they would have either forgotten it or they don’t have any clue how to withdraw superannuation fund. What is Superannuation fund? How to withdraw Superannuation Fund in India? What are various options available to an employee to withdraw / transfer such superannuation scheme?
Also Read: How an employee can calculate gratuity on their own?
What is Superannuation Fund?
These days, many corporates are offering the superannuation benefit, but there is limited information available over internet about some painful areas in it. If you search google, you would find superannuation fund details of Australia and not in India. So even Google has no clue about such complicated scheme. Superannuation is a retirement benefit provided by the employer to the employee. If this is part of your CTC break-up, then the employer should make contributions to your superannuation fund scheme either month on month or year on year. Generally, companies take Group Superannuation Scheme from any of the approved insurance companies like LIC, ICICI Life insurance, etc. The returns of the superannuation fund may differ according to the company providing the policy.
The employer keeps making contributions to the employee superannuation scheme year on year as long as the employee is with the company. Either on retirement or post resignation, the employee would have the option of buying a superannuation-linked pension from any insurance company. This need not be with the same insurance company where the superannuation fund is contributed.
Refer Superannuation fund scheme guide for more info.
When can employee withdraw superannuation fund in India?
Withdrawal of superannuation fund can happen in a few instances like
1) Death of the employee. In this case, either nominee or family members would make the withdrawal claim of superannuation fund.
2) Withdrawal possible when an employee changes the job. It is irrespective whether the new employer is providing superannuation benefit or not.
3) Withdrawal on the retirement of the employee.
4) Transfer superannuation fund benefit amount to NPS (Tier-1) in case employee resignation (this is movement and not withdrawal).
How to withdraw Superannuation Fund in India?
I am providing these details based on my recent personal experience, hence I feel these are accurate, but one need to recheck before they proceed in the superannuation withdrawal process.
There are two options available for employee.
1) Employee is allowed for commutation i.e. lump sum withdrawal
2) Employee is allowed to get annuity pension payment.
I) Superannuation withdrawal rules for commutation (Lumpsum withdrawal)
(i) Lump sum withdrawal up to 33% of a superannuation fund, if employee is eligible to receive a gratuity. The employee would be eligible for gratuity only if he works for 5+ years in the same company.
(ii) Lump sum withdrawal up to 50% of a superannuation fund, if employee is NOT eligible to receive a gratuity. Employee would NOT be eligible for gratuity if he has moved out of the company within 5 years.
e.g. if the employee worked for 5.5 years in the company and has superannuation fund accumulated value of Rs 10 Lakhs including interest. They would be eligible to take 33% i.e. Rs 3.3 Lakhs in lumpsum withdrawal option.
II) Superannuation withdrawal rules for Annuity Pension Payment
Once an employee chooses commutation option, the balance would be considered for annuity pension payment. In the above example, Rs 6.7 Lakhs would be paid through annuity pension payment option. One can consider any of the below options for this annuity pension scheme. These scheme details look more or less like annuity pension schemes offered by insurance companies. The details may slightly vary between the insurance companies, hence one need to check before opting them.
1) Life Annuity: This option pays annuity for life.
2) Life Annuity with an annual increase of 5%: This annuity pension option pays annuity for life. Annuity payout increases at a simple rate of 5% for each complete policy year throughout the life of the annuitant.
3) Life Annuity with Return of Balance Purchase Price: This option pays you annuity for life and on death, the Balance Purchase Price is returned to your nominee. Balance Purchase price will be equal to Purchase Price (premium paid by you in the beginning excluding taxes) less sum total of the annuities paid. If the balance is negative, then no benefit will be payable on death.
4) Life Annuity with Return of Purchase Price: This annuity option pays annuity for life and on death the purchase price is returned to the nominee.
5) Life Annuity with Return of 50% Purchase Price: Under this annuity option, annuity is paid for life and on death, 50% of the Purchase Price is returned to your nominee.
6) Life Annuity with Return of 75% Purchase Price: This option pays you annuity for life and on death, 75% of the Purchase Price is returned to your nominee.
7) Life Annuity guaranteed for 5, 10, 15 years and payable for life thereafter: This option pays annuity for a guaranteed period of 5, 10 or 15 years (as chosen by annuitant), and life thereafter. In case of demise during the guaranteed period, annuity for the remaining guaranteed period will be paid to the nominee.
8) Life Annuity with return of Purchase Price on Critical illness (CI) or Permanent Disability due to accident (PD) or Death: This option pays you annuity till earlier of first occurrence of any of the 7 specified CI after policy inception or PD, before the age of 80 years, or death. Further, the Purchase Price is returned to annuitant/nominee, in case of first occurrence of any of the 7 specified CI or PD before the age of 80 years, or death.
9) Joint Life Last Survivor without Return of Purchase Price: This option pays annuity for life and on death the annuity continues for the life of the named spouse. Where the named spouse has pre-deceased or where the named spouse is no longer a legal spouse at the time of annuitant demise, no further benefits are payable.
Also Read: LIC Jeevan VII Annuity Scheme provides regular pension – Should you opt?
10) Joint Life Last Survivor with Return of Purchase Price: This option pays you annuity for life and on death the annuity continues for the life of the named spouse. On the demise of the last survivor the Purchase Price is returned to your nominee. Where the named spouse is no longer a legal spouse at the time of your demise, no benefits shall be payable except the Return of Purchase Price to the nominee.
11) Joint Life, Last Survivor with Return of Purchase Price in parts: In this option annuity is paid to you for life and thereafter your spouse for his/her life. On the earlier of either your or your spouse’s demise, 50% of the Purchase Price is returned to the survivor (annuitant / annuitant spouse). After the death of the last survivor balance 50% of the Purchase Price, is returned to the nominee.
Where a named spouse is no longer a legal spouse at the time of annuitant demise, 100% of the Purchase Price shall be returned to the nominee and no further benefits are payable.
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Hi Suresh… Regarding the 33% withdrawal option, is there Income Tax applicable on it ? I am 45 and it has been an year since i have left my old organization. I got to know that any withdrawals will attract income tax if it is before I turn 60.
Anfran, Amount withdrawn by the employee at the time of change of job is taxable under the head “Income from other sources”
Hello, I have opted for superannuation 1 year back, but somehow I am not able to track the amount details for this scheme. Can this scheme be discontinued?
Is there a way we can stop this scheme once started?
It depends on your employer. In case you have opted it, it would continue till you resign and move out of the company. Pks check with your employer.
Great contribution. My father expired and he was getting annuity from life insurance corporation where his employer deposited superannuation fund. Now which form has to be filled to get refund in savings account of mother, please guide.
Sunil, You need to approach LIC customer care or nearest LIC branch regarding this.
If we are not eligible for gratuity, then we can eligible to withdraw upto 50% of the superannuation fund. So what about the remaining 50% cumulative amount and how we can withdraw or what are benifits
Its implied that balance one has to take annuity plan
How can i move my Super annuation fund to NPS?
It is taxable?
First open NPS account and approach employer where you have superannuation and complete the documentation process