A reader says, “I’m 57 and on the verge of retirement and in IT, can I go for the next 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 only a few days in the past, it might not be a nasty thought to debate it once more. The reason being, the discussions we’ve got had with associates 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 clearly says that solely these individuals who have been contributing at the next charge to the Workers’ Provident Fund in 2014 are eligible. Secondly, these staff who didn’t or forgot to train the choice are the one staff who can now train the choice. The variety of such staff might not be very excessive as a result of not many staff have been paying at the next quantity beneath part 26(6) of the EPF scheme who forgot to train the choice. The workers which can fulfill all of the situations one, two and three won’t be very excessive. A tough estimate of the quantity can be round one lakh“.
That is fairly fascinating. 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 as if a really low quantity. Certainly rather more subscribers can be eligible?!
A Twitter follower stated 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 essential contribution. She approached her HR for greater pension eligibility. When her HR spoke to an EPF inspector, they have been knowledgeable that the worker was not eligible for the next pension!
There may be nonetheless quite a lot of confusion and uncertainty within the matter and the way the EPFO decides to interpret the supreme courtroom verdict.
Three situations should be concurrently met.
(i) “The workers and employers who had contributed beneath 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 beneath the proviso to Para 11(3) of the pre-amendment scheme (since deleted) whereas being members of EPS,95”.
What does “contributed beneath 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 is just 12% of the wage for the worker contribution. Nonetheless, this might imply lakhs and lakhs of individuals can be eligible, and the EPFO can not bear the pension price because the annuity charge on a lump sum cost is simply too excessive.
Does the EPFO anticipate a 12% of wage contribution by each employer and worker to be eligible for the next EPS pension? The supreme courtroom order doesn’t point out this, however that is the one means the eligible quantity would drop near what Mr Jalan talked about.
Please observe: we solely ask questions right here. We don’t supply opinions apart 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 the next EPS pension. It will likely be loads harder 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 employees and compute the annuity charge = 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 observe: The annuity charge argument is just legitimate for individuals who have retired or are about to retire. Others with a number of years of service left may also should contribute every month, so the time worth of cash will decrease the speed.
The excessive charge appears too good to be true. Both solely a small part of staff are eligible for this or there may be one other twist within the plot. All eyes on the EPFO “discover board”.
We’ve got already beneficial what these about to retire and (actually) eligible for the next pension ought to do – Greater EPS Pension: Ought to those that retired not too long ago or are about to retire go for it? – by wanting on the preliminary withdrawal charge of the corpus in retirement.
Our most essential advice is: don’t go by what you see circulated in social media or amongst worker teams. Watch for readability from the EPFO and nudge your HR to verify this with the EPFO workplace for various permutations and combos.
Lastly, the next pension alone shouldn’t be sufficient for monetary independence in retirement. See: Is a pension of fifty% of the final drawn pay sufficient for retirement?
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