A reader says, “I’m 57 and at the verge of retirement and in IT, can I go for the next EPS pension?”
As common readers is also mindful, we now have mentioned this matter at some period:
Even though we lined the reader’s query only some days in the past, it will not be a foul concept to speak about it once more. The reason being, the discussions we now have had with buddies at Price-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 obviously says that solely the ones individuals who had been contributing at the next charge to the Staff’ Provident Fund in 2014 are eligible. Secondly, the ones workers who didn’t or forgot to workout the choice are the one workers who can now workout the choice. The collection of such workers will not be very top as a result of now not many workers had been paying at the next quantity below segment 26(6) of the EPF scheme who forgot to workout the choice. The workers which is able to fulfill the entire stipulations one, two and 3 may not be very top. A coarse estimate of the quantity can be round one lakh“.
That is reasonably fascinating. He believes that solely about one lakh EPFO subscribers who retired after Sep 2014 or are nonetheless in carrier are eligible for upper EPS pension. This turns out like an excessively low quantity. Indubitably a lot more subscribers can be eligible?!
A Twitter follower mentioned his spouse had at all times contributed 12% of her wage to the EPF. The employer had additionally contributed 12% of her wage till 2018 after which modified to the fundamental contribution. She approached her HR for upper pension eligibility. When her HR spoke to an EPF inspector, they had been knowledgeable that the worker used to be now not eligible for the next pension!
There’s nonetheless numerous confusion and uncertainty within the topic and the way the EPFO makes a decision to interpret the best court docket verdict.
3 stipulations will have to be concurrently met.
(i) “The workers and employers who had contributed below paragraph 26(6) of EPF Scheme on wage exceeding the prevalent salary ceiling of Rs 5000/- or 6500/-” and (ii) “didn’t workout joint possibility below the proviso to Para 11(3) of the pre-amendment scheme (since deleted) whilst being contributors of EPS,95”.
What does “contributed below paragraph 26(6) of EPF Scheme on wage exceeding the prevalent salary ceiling of Rs 5000/- or 6500/-” imply? Does it imply a contribution of 12% of wage to EPF (worker contribution on my own) or 12% of wage through each employer and worker with 8.33% of employer contribution to EPS?
Most of the people argue it’s only 12% of the wage for the worker contribution. Then again, this is able to imply lakhs and lakhs of other folks can be eligible, and the EPFO can’t endure the pension value because the annuity charge on a lump sum fee is simply too top.
Does the EPFO be expecting a 12% of wage contribution through each employer and worker to be eligible for the next EPS pension? The best court docket order does now not point out this, however that is the one approach the eligible quantity would drop with regards to what Mr Jalan discussed.
Please notice: we solely ask questions right here. We don’t be offering critiques as opposed to extra readability is needed at the eligibility and the real pension calculation, as discussed in previous articles.
The calculation is also easy for a PSU worker who has labored in the similar organisation and is “eligible” for the next EPS pension. It’ll be so much more difficult for a company worker who has modified jobs even as soon as and whose wage fluctuates.
Then there may be the query of the upper pension itself. If we take a look at some unofficial illustrations circulated amongst personnel and compute the annuity charge = further annual EPS pension divided through lump sum paid from EPF to EPS, the velocity appears to be in double digits. Such top payouts are unsustainable through an already bankrupt EPFO.
Please notice: The annuity charge argument is solely legitimate for individuals who have retired or are about to retire. Others with a number of years of carrier left may also need to give a contribution each and every month, so the time price of cash will decrease the velocity.
The top charge turns out too excellent to be true. Both just a small segment of workers are eligible for this or there may be every other twist within the plot. All eyes at the EPFO “realize board”.
Now we have already beneficial what the ones about to retire and (in reality) eligible for the next pension must do – Upper EPS Pension: Will have to those that retired lately or are about to retire go for it? – through having a look on the preliminary withdrawal charge of the corpus in retirement.
Our maximum vital advice is: don’t move through what you notice circulated in social media or amongst worker teams. Look forward to readability from the EPFO and nudge your HR to verify this with the EPFO place of work for various variations and combos.
In any case, the next pension on my own isn’t sufficient for monetary independence in retirement. See: Is a pension of fifty% of the ultimate drawn pay sufficient for retirement?
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Dr M. Pattabiraman(PhD) is the founder, managing editor and number one writer of freefincal. He’s an affiliate professor on the Indian Institute of Generation, Madras. He has over 9 years of revel in publishing information research, analysis and monetary product construction. Hook up with him by means of Twitter or Linkedin or YouTube. Pattabiraman has co-authored 3 print books: (1) You’ll be wealthy too with goal-based making an investment (CNBC TV18) for DIY buyers. (2) Gamechanger for younger earners. (3) Chinchu Will get a Superpower! for youngsters. He has additionally written seven different loose e-books on more than a few cash control subjects. He’s a patron and co-founder of “Price-only India,” an organisation for selling impartial, commission-free funding recommendation.
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