The group pension scheme (GPS) is in for another overhaul.
The Insurance Regulatory and Development Authority (Irda) is considering a proposal to allow new employees enter into existing group pension schemes, which are generally offered by companies as an additional retirement benefit to top managers.
“We are looking into a proposal to allow new employees also to join the GPS. After we barred the entry of new employees into GPS last year, such schemes suffered,” said a top official of the insurance regulator.
After the rules are changed, new recruits joining a company would get retirement benefits through GPS in addition to the employees’ provident fund (EPF) scheme.
Irda had, some time back, barred the entry of new employees into group pension schemes.
This means that if a company had 100 employees under group pension scheme, it was not allowed to add more to this number.
“Managers in the middle and the top level usually go for GPS retirement benefit as it is considered as employee-friendly. Employees opt for up to 15 per cent of the basic pay as contribution to the group pension scheme. It was earlier popular among employees in IT companies, but not any more. Companies were using group pension scheme as a perk to attract talents as they are not entitled for government pension,” said an insurance industry source.
This provision as well as the clause of guaranteed returns to the customers forced many insurance companies to shelve launching of their pension product plans.
As per the LIC’s pension scheme structure, it is not obligatory or statutory on the part of the employer to provide for pension to all employees. It is entirely up to him to decide to which class of employees he desires to extend the scheme. The eligibility conditions may be defined on the basis of designation or salary.
However, after the categories are specified, employer cannot discriminate between the employees and thus extends the scheme uniformly. Life Insurance Corporation Limited itself was managing nearly Rs 40,000 crore under group pension scheme.
The maximum annual contribution that an employer can make to the