LIC New Group Superannuation Cash Accumulation Plan
The Life Insurance Corporation of India launched the New Group Superannuation Cash Accumulation Plan in 2013. This traditional plan is good for employers who have a defined contribution or benefit superannuation scheme for their workforce.
A superannuation is a pension given at the time of retirement comprising contributions from your employer. Usually, 5% to 15% of the basic salary is paid by the employers as superannuation. No contribution has to be made by the employee.
The employer can either form a Trust to manage a superannuation scheme and make it the Master Policyholder, or become the Master Policyholder themselves. In the case of Defined Contribution Superannuation Scheme, individual accounts will be maintained for the group members, but for Defined Benefit Superannuation Scheme, only one account is managed.
This is not an insurance scheme. The contributions (premium) to the superannuation plan can be made any time of the year.
Eligibility Criteria for LIC New Group Superannuation Cash Accumulation Plan
A New Group Superannuation Cash Accumulation Plan can be acquired if the employer meets the criteria mentioned below:
Minimum age | 18 years |
Maximum age | 75 years |
Maximum age at maturity | 85 years |
Minimum group size for existing scheme | No limit |
Minimum group size for new employer-employee scheme | 10 |
Minimum group size for government- sponsored Social Security Scheme | 50 |
Maximum group size | No limit |
Features of LIC New Group Superannuation Cash Accumulation Plan
The key features of the LIC New Group Superannuation Cash Accumulation Plan are listed below.
Plan type | Non-linked, non-participating superannuation plan |
Policy account | Single account in the name of the employer/Trust/Trustees for all employees under the group scheme |
Policyholder | Employer/trustees |
Policy/premium payment term | Annual, renewable |
Minimum contribution | The amount required as per AS 15(R) |
Maximum contribution | The amount required as per AS 15(R) |
Cooling-off period | The policy bond can be returned within 15 days if the terms of the policy are not satisfactory. |
Loan on policy | Not available |
Bulk exits | If the withdrawal amount in any policy year is more than 25% of the total policy account value at the beginning of that year, it will be considered as Bulk Exit. |
Surrender Value | The policy can be surrender with a 3-month advance notice. Guaranteed Surrender Value or Special Surrender Value can be obtained on surrender. |
Benefits of LIC New Group Superannuation Cash Accumulation Plan
The primary benefits to an employer enrolled in the New Group Superannuation Cash Accumulation Plan are:
- Interest rates: There are 3 kinds of interest rates payable to the policy holder: Minimum Floor Rate (MFR), Additional Interest Rate (AIR) and Residual Addition (RA). MFR is a guaranteed interest rate, which is at an annual rate of 0.5%. A non zero-positive AIR is also announced by the LIC for each financial quarter. A nonzero-positive RA could also be added to the policy account after 5 years of commencement of policy.
- Surrender value: When the employer surrenders the policy, they avail either Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV). While the GSV is equal to 90% of the total contributions paid, excluding the benefits paid since the policy began, SSV is equal to the policy account value on the day of surrender, excluding the applicable charges.
How It Works
As an employer, if you have a superannuation plan for your employees, you can create your fund with the LIC. In this case, a policy account with New Group Superannuation Cash Accumulation Plan of the LIC 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 LIC 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.
On a daily basis, a shadow account is maintained for each policy account. The amount in this account is based on the accumulation from all income elements for the LIC and deductions such as partial withdrawals on the policy account value. The actual gross investment return and reduction in yield is calculated from the fifth year of the policy, based on the numbers in this shadow account. A table of maximum reduction in yield, one of the factors influencing Residual Addition on policy account, is given below.
No. of years since inception | Maximum Reduction in Yield annually (Difference between Gross and Net Yield) |
5 | 4.00 % |
6 | 3.75 % |
7 | 3.50 % |
8 | 3.30 % |
9 | 3.15 % |
10 | 3.00 % |
11 and 12 | 2.75 % |
13 and 14 | 2.50 % |
15 and above | 2.25 % |
Charges applicable on New Group Superannuation Cash Accumulation Plan
- 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.
Size of Policy Account Value of the Scheme | FMC per annum |
Initial amount up to Rs. 1 crore | 0.50% |
On subsequent amount above Rs. 1 crore but less than or equal to Rs. 5 crores | 0.45% |
On subsequent amount above Rs. 5 crores but less than or equal to Rs. 25 crores | 0.40% |
On subsequent amount above Rs. 25 crores but less than or equal to Rs. 100 crores | 0.35% |
On subsequent amount above Rs. 100 crores but less than or equal to Rs. 200 crores | 0.30% |
On subsequent amount above Rs. 200 crores but less than or equal to Rs. 400 crores | 0.25% |
On subsequent amount above Rs. 400 crores but less than or equal to Rs. 800 crores | 0.20% |
On subsequent amount above Rs. 800 crores but less than or equal to Rs. 2,000 crores | 0.15% |
On subsequent amount above Rs. 2,000 crores | 0.10% |
- 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.
- Service Tax Charge: Service tax will be charged as applicable.
- Revision of charges: The Corporation can revise the FMC anytime, with approval from IRDA and an advance notice of 1 month to the policyholder. At the most, 1% can be charged as FMC annually. If the revised charges are not acceptable to the policyholder, they can withdraw the policy without paying any surrender charge.
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