pension scheme, is there an advantage in choosing a higher pension offer? – is pension scheme profitable for you
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Applicable to: At present, EPS is applicable to two types of employees. First, whose basic salary and DA is less than Rs 15000. Second, whoever was a member of EPF on or before September 1, 2014. At this time, even though the salary may be one lakh rupees, but the maximum limit for EPS will be considered as 15 thousand only. According to this 8.33 percent share only Rs 1250 will be deposited in EPS.
Pension on what basis: Now also know the formula of pension calculation. Note down the monthly average salary of the last five years of the job. Then see how many years contributed within the range of EPS. If contributed more than 20 years, then add 2 years extra. Multiply the number of years of average salary and EPS and divide by 70. This will be the pension amount.
If the average salary is Rs 15000, if there is a job of 35 years, then a pension of Rs 7500 is made. If this average salary is considered to be one lakh, then the pension will increase to Rs.50,000. In 1996, an option was given to the employee to contribute on the basis of his actual basic salary and DA, so that he would get more pension. But on September 1, 2014, this option was discontinued. The matter reached the Supreme Court.
Waiting for instructions: In November last year, the Supreme Court said that four months’ chance to choose higher pension should be given again. Employees in service as on September 1, 2014, who can come under the ambit of higher pension by contributing more, are awaiting detailed instructions from the Employees’ Provident Fund Organization (EPFO). This organization of the Central Government manages the pension.
How long time limit : The Supreme Court deadline will end on March 3. Before that, there is a big question that for more pension, the employee will have to pay the previous outstanding contribution along with interest, so is it a profitable deal or not. There is no straight answer. The actual amount of arrears to be paid may differ from employee to employee.
What is estimation? Currently, there is a maximum contribution of Rs 1250 in EPS. If exemption of contribution was given on the basis of Rs 1 lakh, then Rs 8330 would have to be paid every month. That is, the contribution of Rs 7080 was given less every month. There will be difference in the years of service and salary of each member. On the basis of that, there is a possibility of getting information about the outstanding amount from EPFO. It is possible that this difference can be put in EPS from the amount deposited in the provident fund.
Whose loss: Those with fewer years left in service may lose out on the compounding effect of the fund. Analysts estimate that profit is possible for those who have seen a sharp increase in their salary, but in those whose salary has not seen much growth, in that case the possibility of more profit is less.
Finance expert P. Murari says that even for people in higher tax slabs, it may be better not to opt for a higher pension than EPS. One option is that on retirement, you can buy government bonds from the Reserve Bank with the provident fund amount and continue to get regular income. In this, the return of the nominee will not be reduced and the deposited amount will also be left for the successors after the nominee.
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