Superannuation is a benefit provided by an employer to help their employees build a retirement corpus. It is a type of retirement pension scheme provided by an organization for the welfare of its employees.
Retirement could have different meanings for different people. For some, it is when you are no longer permitted to work for your employer. For others, it could mean a time when they no longer feel like working for money anymore.
The age for retirement varies across organizations and geographies. In India, most organizations and government departments have fixed either 60 or 65 as the age for retirement. This age was increased from the earlier 58. The increase in retirement age was done keeping in view the increasing average life spans in India. The current average life span is ~70 years which means several people live much beyond this age.
With retirement, the greatest change that occurs is that you switch from a dependent income to an independent income stream. Saving during the working years is the best way to accumulate a large corpus that can yield pay outs when you retire.

What is Superannuation?
Superannuation is a retirement benefit provided by an employer to help their employees build a retirement corpus. Superannuation is an organizational pension program created by a company for the welfare of its employees. It is also called as a company pension plan. In generally, funds that are deposited in a superannuation account grow until withdrawal or retirement, without tax implications.
There are several options to invest and each comes with unique benefits. You may invest in PPF to earn a predictable return or look at pension plans if you want a steady flow of money until the end of your life. Needless to say, ULIPs are useful to generate wealth and take advantage of bull runs in the equity market.
Types of Superannuation
Superannuation can be broadly classified into two types:
1. Defined Benefit:
In this type, the output is pre-defined, implying that the amount payable to the employee post-retirement can be easily calculated using a recommended formula. The monthly investment or contribution has no bearing on the output. The amount payable post-retirement depends on the number of years of service and the pay scale of the employee. Gratuity is the best example of a defined benefit superannuation scheme.2. Defined Contribution:
In this case, the contribution is defined and the output is a factor of the input + market forces. The upside is that the employee can decide their contribution amount depending on the retirement corpus they are aiming to build.How does a Superannuation Plan Work?
Insurance firms manage superannuation funds and most employers prefer to buy such group superannuation plans. The general thumb rule is to invest about 15% of your base income into the superannuation fund. However, the ultimate decision rests with you.
You may choose not to invest as well. Although the monthly contribution looks minuscule, it is good enough to build a sizeable capital that can help you meet your financial obligations post-retirement. The interest rates offered on superannuation schemes are similar to those applicable on Provident Fund.
Even if you change employment, you can transfer your fund to your new employer or even withdraw. You can choose to leave it as it is, as well, until retirement.
Types of Annuity Options under Superannuation
You have multiple options to avail money in the form of a pension from your superannuation fund. A few are listed below:
a) Deferred Annuity or Pension:
Deferred pension schemes are similar to deferred annuities. You may opt to get either a lump sum amount on or after a certain date or avail of regular pay-outs in the form of annuities.b) Payable for Life:
In this case, you will get a pension from the date of retirement until the end of your life.c) Return of Corpus:
You will get a pension until the end of your life. The corpus is then returned to your nominee.d) Guaranteed for a Term (5/10/15/20 Years):
A guaranteed pension amount is paid out for the defined term.e) Joint Life Pension (With or Without Return of Corpus):
Pension will be paid to you and then to your spouse after your demise. If the return of corpus is opted for, the corpus would go to the nominee.f) Joint Life with 50% Pension to Spouse:
As the term indicates, pension amount to the tune of 50% of the amount paid to you, will be paid to your spouse after your demiseg) Increasing Pension:
Your expenses may gradually increase post-retirement. Healthcare costs go up along with age. If you opt for an increased pension, your pension will gradually increase with age.h) Commutation:
You can opt to take a portion of the fund as a lump sum amount and the rest in the form of a pensionIncome Tax Benefits In Superannuation
Both employers and employees can avail income tax benefits for superannuation schemes under the Income Tax Act, 1961. The income tax benefits are available for the superannuation schemes approved/recognized by the Commissioner of Income Tax.
Contribution to an approved superannuation scheme offers the following tax benefits:
a) Benefits for Employer
Employers can claim their part of the contribution to the employees’ superannuation fund as a deductible expense. Other than that for self-managed trusts, the income from an approved superannuation fund is exempt from tax.
b) Benefits for Employees
Employees have the following tax benefits available to them while contributing to an approved superannuation fund:
i. Contribution of up to Rs 1.5 lakh in one financial year is deductible under section 80C
ii. The benefit you receive upon injury or received by the family upon death is not taxable
iii. Interest earned on the funds in the superannuation fund is not taxable
iv. You can withdraw up to 1/3rd of the fund value tax-free upon retirement. The remaining amount should go to a pension plan
v. Employer’s contribution to your superannuation fund over Rs 1.5 lakh per annum is taxable as a perquisite
vi. Any amount you withdraw at the time of switching jobs will be taxable