Should I opt for EPS 95 Higher Pension Scheme?
This is the big question now a days employees working in Government sector, public sector and private sector asking each other, so in this article we try to clarify our doubts.
What is EPF?
EPF stands for Employee Provident Fund, which is a social security scheme, It is a compulsory savings scheme established by the government to help employees save a portion of their salary for retirement and provide financial security. Under this scheme, both employees and employers contribute a fixed percentage of the employee’s salary towards the EPF account.
The current contribution rate is 12% of the employee’s basic salary plus dearness allowance.
The funds accumulate over time and earn interest, which is currently set at a fixed rate by the government.
What is EPS 95?
EPS 95 stands for “Employees’ Pension Scheme 1995.” It is a government-backed pension scheme for employees working in India’s organized sector. The scheme is administered by the Employees Provident Fund Organisation (EPFO), which is a statutory body under the Ministry of Labour and Employment.
In this scheme
12% employees contribution goes to EPF
8.33% employers contribution goes to EPS for monthly pension and remaining 3.67% goes to EPF that will get lumpsum after retirement.
Should I opt for EPS 95 Higher Pension Scheme
How we get Pension?
Your contribution toward EPS 95 pension is collecting in EPFO which will offer pension monthly as salary
For self: 100% of pension full life time
For spouse: 50% of pension full life time (applicable only after employee death)
For kids: 25% of Pension upto age of 25 years for maximum two children(applicable only after both employee and his/her spouse death)
How Pension is being calculated?
Formula: Pensionable Salary × No. Of years service ÷ 70
Pensionable Salary: Pensionable salary includes average of last sixty months Basic plus DA.
No of years service: no of years service calculated for the age of 58 years, if your service more than twenty years two more years will be added as bonus ( if 21 years service for age 58 then no of years service considered as 23 years). Maximum service allowed 35 years.
Who is eligible to opt Higher Pension Scheme?
1. Private sector employees who enrolled EPS 95 on or before 2014
2. Public sector employees who enrolled EPS 95 on or before 2014.
3. Government sector employees who enrolled EPS 95 on or before 2014.
In 1995 Government capped higher Pension for 5000 Pensionable salary I.e pension is ₹2500 only
Later 5000 increases to 6500.
In 2014 this Pensionable salary increases to 15000 I.e Pension will get ₹7500.
What is the Issue of Higher Pension?
In 2014 the government asked joint option for higher pension for actual salary but so many people not opt due insufficient knowledge so
In November 2022 the honorable supreme court given the order to give a chance to opt higher pension for left out employees on actual salary.
Should I opt for EPS 95 Higher Pension Scheme?
Answer will be different from one person to another person, please consider following points before opt for higher pension.
1. Calculate pension amount
2. Calculate how much amount will go from EPF to EPS upto age 58 years.
3. Government policy may change as Government wants to reduce the burden.
4. Your vision how much money you need while Retirement.
Read more: NPS Intrest Rate 2023 and Extra Tax Benefit
Conclusion:
If Retirement is in 3 to 5 years can think of opting higher pension
If service is left more than 15 to 20 years is not advisable to opt for higher pension.
Read more: Kisan Vikas Patra Invest and Double Your Money
Disclaimer: This article is only for information and knowledge purposes there is no advice to opt or not opt, before doing financial decisions please consult your financial advisor.
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