Retirement funds are the funds which are accumulated throughout the working life of an individual for a proposed benefit payout when he superannuates or actually retires. This fund is an important source of monetary wealth used to earn income (in the form of annuity) to maintain the standard of living of the beneficiaries after retirement.
In the absence of a universal social security system, management of pension funds is important to Indian citizens. Occupational employee benefit funds namely, provident fund, gratuity and superannuation fund, form a large part of the social security structure for the organized sector employees. Occupational pension funds are regulated by the government through various agencies. Each type of retirement benefit fund could be managed by the employer (self-managed fund) or can be outsourced to government agencies (provident fund) and insurance companies (gratuity / superannuation). Gratuity and superannuation funds are also allowed to be managed by insurance companies under the aegis of the Insurance Regulator – IRDAI (Insurance Regulatory and Development Authority of India). Gratuity and provident funds are defined benefit funds whose liability has to be borne by the employers. Superannuation (pension) can be DB (Defined Benefit) or DC (Defined Contribution) based on the employer’s preference.