Many EPFO subscribers who retired after Sep 1st 2014, or are nonetheless in service have the inaccurate impression that they are going to routinely be eligible for increased EPS pension. That is incorrect, as clarified by the EPFO round issued on Feb twentieth 2023.
In keeping with level no 5 of the round:
“5. Subsequently, in compliance of the Hon’ble Supreme Courtroom judgement dated 04.11.2022, following staff with their employers might submit joint choice underneath para 11(3) and 11(4) to the involved Regional Workplace:
i. The staff and employers who had contributed underneath paragraph 26(6) of EPF Scheme on wage exceeding the prevalent wage ceiling of Rs 5000/- or 6500/-; and
ii. didn’t train joint choice underneath the proviso to Para 11(3) of the pre- modification scheme (since deleted) whereas being members of EPS,95; and
iii. had been members previous to 01.09.2014 and continued to be a member on or after 01.09.2014.”
It have to be understood that (i), (ii), and (iii) ought to be happy for an worker to be eligible for increased pension.
The important thing circumstances are (i), “The staff and employers who had contributed underneath paragraph 26(6) of EPF Scheme on wage exceeding the prevalent wage ceiling of Rs 5000/- or 6500/-” and (ii), “didn’t train joint choice underneath the proviso to Para 11(3) of the pre- modification scheme (since deleted) whereas being members of EPS,95”.
Subsequently solely a small subset of these a part of EPFO earlier than Sep 1st 2014, would qualify as per this situation. On the time of writing (twenty fourth Feb 2023, 16:00 hours), there may be nonetheless no readability on the quantity of pension eligible subscribers would get.
Those that go for increased pension must lose a sizeable chunk of their EPF corpus (contributions plus curiosity) to get this pension. We have now already advisable that that is undesirable until the subscriber belongs to the low earnings tax slabs. See: Ought to I go for increased EPS pension by contributing a lump sum?
This can be a abstract of the article:
- A considerable sum of a number of lakhs must be paid from the EPF to the EPS to avail increased pension. It will interrupt the compounding of the EPF corpus for many who nonetheless have a couple of years of service left.
- Suppose you pay the lump sum and go for the next EPS pension, estimate what it will be on the time of retirement.
- As an alternative, in case you let that cash compound in EPF and use it to buy a authorities bond through RBI Retail Direct upon retirement, how a lot would the curiosity payout be? For instance, I used RBI Retail Direct to purchase authorities bonds and create an earnings supply.
- Suppose the RBI bond payout will not be a lot completely different from the EPS pension. In that case, the RBI bond is the superior choice as a result of the bonds might be held collectively along with your partner in both or survivor mode, and the identical curiosity payout will proceed for the lifetime of each holders, and the cash will go to heirs.
- Distinction this with the EPS pension, the place the corpus can’t be recovered; worse, the payout to the surviving partner will drop by 50% upon the subscriber’s demise.
- Not choosing the improved EPS pension has one other benefit. There may be additional liquidity to go for a pension at a later age. Insurance coverage annuity payouts after 70 are sometimes extra profitable than authorities bond coupon charges. See: I want a pension: Ought to I purchase an annuity or a govt bond?
It’s unfair to anticipate subscribers to go for increased EPS pension by March third 2023, when the precise pension calculation has nonetheless not been communicated by the EPFO. It’s fairly seemingly that this deadline will probably be prolonged.
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