Rule 307 — Scheme of insurance or annuity.
Sub-rule (1) requires the trustees, for the purpose of providing the annuities for the beneficiaries, either to enter into a scheme of insurance with the Life Insurance Corporation established under the Life Insurance Corporation Act, 1956 or any other insurer as defined in section 2(58) of the Act, or to accumulate the contributions in respect of each beneficiary and purchase an annuity from that Life Insurance Corporation of India or any other insurer at the time of the retirement or death of each employee, or on his becoming incapacitated prior to retirement.
Sub-rule (2) disapplies sub-rule (1) to a fund established or constituted under an irrevocable trust whose sole purpose is to make payment of pension or family pension in accordance with the rules or regulations made under ten named enactments: the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980; the State Bank of India Act, 1955; the State Bank of India (Subsidiary Banks) Act, 1959; the National Bank for Agriculture and Rural Development Act, 1981; the Industrial Development Bank of India Act, 1964; the Export-Import Bank of India Act, 1981; the Industrial Reconstruction Bank of India Act, 1984; the Small Industries Development Bank of India Act, 1989; and the National Housing Bank Act, 1987.
A fund that promises annuities has to be able to pay them, and the rule confines the trustees to two ways of securing that — insuring the liability from the start, or accumulating the contributions for each beneficiary and buying the annuity when the entitlement arises. Sub-rule (2) recognises that a statutory pension fund under one of the named enactments already pays pension under its own rules or regulations, so requiring it to buy annuities as well would serve no purpose.
The two routes in sub-rule (1) are alternatives and both end in an insurer: either a scheme of insurance entered into up front, or accumulation with a purchase of an annuity at the triggering event. The events that trigger the purchase under the second route are three — retirement, death, or the employee becoming incapacitated prior to retirement — so the annuity is not bought only on normal retirement. The exclusion in sub-rule (2) is narrow on its own terms: the trust must be irrevocable, its sole purpose must be payment of pension or family pension, and the payment must be in accordance with rules or regulations made under one of the ten enactments listed, so a fund that also does something else, or that operates outside those enactments, remains within sub-rule (1).
The trustees of a superannuation fund for a company's employees may enter into a scheme of insurance with an insurer covering the annuities, or may accumulate each employee's contributions and buy an annuity from the insurer when that employee retires, dies or becomes incapacitated before retirement. A pension fund constituted under an irrevocable trust by a bank solely to pay pension under regulations framed under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 is outside sub-rule (1) altogether.
A reader meets it in the trust deed and the scheme documents of an annuity or superannuation fund, and in the approval proceedings where the trustees must show which of the two routes in sub-rule (1) the fund follows.
accumulate the contributions in respect of each beneficiary and purchase an annuity from the said Life Insurance Corporation of India or any other insurer at the time of the retirement or death of each employee, or on his becoming incapacitated prior to retirement
The provisions of sub-rule (1) shall not apply to a fund established or constituted, under an irrevocable trust, which has its sole purpose to make payment of pension or family pension