It is not an insurance scheme. The contributions (Premium) to the superannuation plan can be made any time during the year. The employer can form a Trust to manage a superannuation scheme.
As an employer, if you have a superannuation plan for your employees, you can create your fund with the Insurer. In this case, a policy account with Insurer is more like a deposit account. Your monthly superannuation contributions and other administrative charges for each employee can be deposited in the same policy account. The Insurer will invest your contributions in various securities and you will receive an interest and other benefits. When an employee retires, they will receive the money as retirement corpus.
Benefits
A guaranteed Interest rates
Surrender Value: When the employer surrenders the policy, they avail either Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV).
Charges applicable:
Fund Management Charge (FMC): FMC is charged on the policy account value every quarter or on exit. This varies according to the size of the policy account value
Market Value Adjustment (MVA): If there is a bulk exit or complete surrender of policy, MVA will be charged on the market value derived from the revaluation of assets. It also applies to withdrawals of more than 25% of the policy account value. It will be deducted from the policy account value before remittance.
Surrender Charges: If a policy is surrendered within 3 years from its beginning, a surrender charge of 0.05% of the policy account value – capped at Rs. 5,00,000 – is applicable. You don’t have to pay surrender charge if the policy is surrendered after 3 policy years.
Tax benefits
The contribution made by the employer comes under business expenses and exempted under sec 37(1) of Income Tax Act 1961. The annuities received by the employee are taxable.