How to get a higher pension in current EPFO ruling explained
Higher pension in current EPFO: Those opting for a higher pension will no longer have to contribute the additional 1.16% of their salary that is above the wage ceiling
The Employees' Provident Fund Organisation (EPFO) has come up with a procedure for a contribution towards higher EPS pension. Those opting for a higher pension will no longer have to contribute the additional 1.16% of their salary that is above the wage ceiling.
According to the labour ministry, the additional contribution of 1.16 per cent of basic wages for subscribers opting for higher pensions will be managed from employers' contributions.
Employees Pension Scheme calculation
At present, the government pays 1.16 per cent of basic wages of up to ₹15,000 (threshold basic wage) as subsidy for contributions towards Employees Pension Scheme (EPS). The employers contribute 12 per cent of basic wages towards social security schemes run by the EPFO. As much as 8.33 per cent out of the 12 per cent contributed by the employers goes into the EPS and the remaining 3.67 per cent is credited into the Employees Provident Fund.
1.16% additional contribution rule for higher EPS
All those EPFO members who are opting to contribute on their actual basic wage which is higher than the threshold of ₹15,000 per month for getting a higher pension, will not have to contribute this additional 1.16 per cent towards EPS.
EPFO new deadline to opt for higher pension
Retirement fund body EPFO has extended the date for filing applications to opt for a higher pension till June 26, 2023.
In order to provide a larger window of opportunity and in order to enable all eligible persons to file their applications, the timeline for filing applications would now be till 26th June, 2023, according to a statement.
Should you opt for higher pension under the Employee Pension Scheme?
According to Ravi Saraogi, Sebi registered investment adviser (RIA), opting for higher pension will lower the burden on you of undertaking exhaustive retirement planning. However, if you do not opt for higher pension, you are left with a large EPF corpus and the onus is on you to design an effective retirement plan. “For individuals who are either financially savvy, or work with a competent adviser, it is recommended not to opt for higher pension. This will give you the flexibility of designing your own personalized retirement plan. However, if retirement planning seems like an uphill task for you, it is better to lock into the higher pension offered by EPS, ” said Ravi Saraogi.
Higher EPFO pension: Why you should avoid going for it
Amit Gupta, MD, SAG Infotech said your early retirement plan may get jeopardised if you choose Higher EPS pension. “For individuals who want to retire early, applying for EPFO's higher pension may not be a wise idea because EPS pension eligibility is only granted after 10 years of employment and 58 years of age. The person receives a pension from the EPS based on a formula and a lump sum tax-free amount from the EPF account at the time of retirement," said Amit Gupta.
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First Published:8 May 2023, 08:19 AM IST
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