I’m about to retire, can I go for a better EPS pension?

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A reader says, “I’m 57 and on the verge of retirement and in IT, can I go for a better EPS pension?”

As common readers could also be conscious, we’ve got mentioned this subject at some size:

Though we lined the reader’s query just some days in the past, it will not be a foul concept to debate it once more. The reason being, the discussions we’ve got had with pals at Charge-only India, a message from a Twitter follower and this interview with KK Jalan, Former Central EPFO Commissioner.

Mr Jalan says, “The para 5 of the (Feb twentieth) round very clearly says that solely these individuals who had been contributing at a better price to the Workers’ Provident Fund in 2014 are eligible. Secondly, these workers who didn’t or forgot to train the choice are the one workers who can now train the choice. The variety of such workers will not be very excessive as a result of not many workers had been paying at a better quantity below part 26(6) of the EPF scheme who forgot to train the choice. The staff which can fulfill all of the circumstances one, two and three won’t be very excessive. A tough estimate of the quantity could be round one lakh“.

That is fairly attention-grabbing. He believes that solely about one lakh EPFO subscribers who retired after Sep 2014 or are nonetheless in service are eligible for greater EPS pension. This looks like a really low quantity. Absolutely way more subscribers could be eligible?!

A Twitter follower stated his spouse had all the time contributed 12% of her wage to the EPF. The employer had additionally contributed 12% of her wage till 2018 after which modified to the essential contribution. She approached her HR for greater pension eligibility. When her HR spoke to an EPF inspector, they had been knowledgeable that the worker was not eligible for a better pension!

There’s nonetheless a whole lot of confusion and uncertainty within the matter and the way the EPFO decides to interpret the supreme court docket verdict.

Three circumstances have to be concurrently met.

(i) “The staff and employers who had contributed below paragraph 26(6) of EPF Scheme on wage exceeding the prevalent wage ceiling of Rs 5000/- or 6500/-” and (ii) “didn’t train joint possibility below the proviso to Para 11(3) of the pre-amendment scheme (since deleted) whereas being members of EPS,95”.

What does “contributed below paragraph 26(6) of EPF Scheme on wage exceeding the prevalent wage ceiling of Rs 5000/- or 6500/-” imply? Does it imply a contribution of 12% of wage to EPF (worker contribution alone) or 12% of wage by each employer and worker with 8.33% of employer contribution to EPS?

Most individuals argue it’s only 12% of the wage for the worker contribution. Nevertheless, this could imply lakhs and lakhs of individuals could be eligible, and the EPFO can’t bear the pension price because the annuity price on a lump sum cost is just too excessive.

Does the EPFO anticipate a 12% of wage contribution by each employer and worker to be eligible for a better EPS pension? The supreme court docket order doesn’t point out this, however that is the one approach the eligible quantity would drop near what Mr Jalan talked about.

Please notice: we solely ask questions right here. We don’t provide opinions aside from extra readability is required on the eligibility and the precise pension calculation, as talked about in earlier articles.

The calculation could also be easy for a PSU worker who has labored in the identical organisation and is “eligible” for a better EPS pension. It will likely be loads more durable for a company worker who has modified jobs even as soon as and whose wage fluctuates.

Then there’s the query of the upper pension itself. If we have a look at some unofficial illustrations circulated amongst employees and compute the annuity price = additional annual EPS pension divided by lump sum paid from EPF to EPS, the speed appears to be in double digits. Such excessive payouts are unsustainable by an already bankrupt EPFO.

Please notice: The annuity price argument is just legitimate for individuals who have retired or are about to retire. Others with a number of years of service left may even must contribute every month, so the time worth of cash will decrease the speed.

The excessive price appears too good to be true. Both solely a small part of workers are eligible for this or there’s one other twist within the plot. All eyes on the EPFO “discover board”.

We’ve got already really helpful what these about to retire and (actually) eligible for a better pension ought to do – Larger EPS Pension: Ought to those that retired just lately or are about to retire go for it? – by wanting on the preliminary withdrawal price of the corpus in retirement.

Our most vital advice is: don’t go by what you see circulated in social media or amongst worker teams. Look ahead to readability from the EPFO and nudge your HR to substantiate this with the EPFO workplace for various permutations and mixtures.

Lastly, a better pension alone isn’t sufficient for monetary independence in retirement. See: Is a pension of fifty% of the final drawn pay sufficient for retirement?

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