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Employee Pension Scheme Update: EPFO has extended the deadline for opting for higher pension under the Employees Pension Scheme (EPS) till June 26, 2023. Employees now have two months in which to decide which option is going to be beneficial for them in the new or old plan.
However, it is not correct to say whether higher pension will be beneficial for all the employees or not. The scheme with higher pension is beneficial for those who want to get higher pension every month after retirement. But for those who want a higher lump sum amount at one go after retirement, a scheme with a higher pension will not be beneficial.
As the employee opts for higher pension, the amount deposited in his EPF account will decrease but the amount deposited in EPS account will increase. But if an employee does not opt for higher pension then a lot of money can be deposited in his EPF corpus. But after choosing this option, separate financial planning will have to be done for post-retirement.
Understand Provident Fund!
All EPFO members have two accounts. In which one account is of EPF and the other is of EPS in which pension amount is deposited. 12 percent of the basic salary and DA of all employees is deposited in the EPF account. The employer also deposits the same amount but the entire amount is not deposited in the EPF account. Out of the 12 per cent contribution made by the employer, 8.33 is deposited in the EPS account and the remaining 3.67 per cent is deposited in the EPF account. But as soon as you opt for higher pension, the contribution made by the employer will change.
what is employee pension scheme
In 1995, the government brought a new law for the employees working in the private sector. The purpose of this law was to give the benefit of pension to the employees working in the private sector as well. When this law was made, the maximum limit of salary for contribution to EPS was fixed at Rs 6500, which was later increased to Rs 15000. However, in 2014 a new rule was made. In which the employee was exempted from contributing a total of 8.33 per cent of the basic salary and DA to the pension fund, that is, it was not necessary for the employees to contribute to the EPS.
This is how you can get more pension!
But if you want more pension after retirement then you can contact your HR department. But if you want to apply for more pension yourself, then you can apply yourself by visiting the EPFO website. After visiting the EPFO website, you will see two options. If the employee has retired before 1st September 2014 and wants to opt for higher pension then he/she has to choose the first option. If the employee is still in the job, then he has to choose another option.
After clicking on the second option to opt for higher pension under EPS, the registration request form will open. They have to submit the form by entering their UAN and Aadhaar. The employer will get the details of the employee’s employee status. Fund deduction for higher pension will start after getting approval from the employer.
EPFO has also given offline facility to opt for higher pension, wherein the employee has to visit the nearest EPFO office or visit the camp where it has been set up. Through this facility, the employees can fill the form and submit it easily.
More salary will be deducted for more pension!
There will be no impact on the salary received by the employee for getting higher pension after retirement. Only the employer’s contribution will change. For example, suppose the basic pay and DA of an employee is Rs 25000, Rs 3000 is deposited in the employee’s EPF account. The employer also has to contribute Rs.3000.
However, according to the new rules, Rs 2080 will be deposited in the EPS account while Rs 920 will be deposited in the EPF account. Till now, 8.33 percent i.e. Rs 1249 was being deposited in the EPS account of the employees getting Rs 15000 basic salary and DA, while the remaining amount was being deposited in the EPF account. But after the salary limit for contribution to EPF is over, the employees will now be able to contribute 8.33 per cent of salary and DA to the pension scheme. That is, 8.33 percent of the amount contributed by the employer will go to the Pension Fund and 3.67 percent will be deposited in the EPF.
how to calculate pension
There is a formula to calculate pension. For example, suppose your basic pay + DA is Rs 15000 and if you have served for 35 years, then after multiplying the two, you need to divide by 70, which becomes Rs 7500, that is, you will get Will get a pension of Rs 7500 per year. month. The Supreme Court has changed this formula. In which average salary of last 60 months has been taken or pension has been fixed on the basis of average of pension.
(pc rights of employees)
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