Higher Pension Details: If you choose the option of higher pension then you can contact the HR where you work. If you want to apply yourself, then you can apply for higher pension by visiting EPFO’s website.
Discussions about Higher Pension intensified once again, because May 3 is very close, and this is the last date to apply. In such a situation, people are still confused about higher pension. Who should choose this scheme for higher pension? Who else should be ignored? Apart from this, the biggest question in the mind of the people is about how to apply. Do you have to contact your employer? Today we will tell you the easy ways to apply, so that you can apply sitting at home. Apart from this, we will try to answer every question related to it.
Actually, there are 2 accounts for every EPFO member, the first is Employees’ Provident Fund (EPF) and the second is Employees’ Pension Scheme (EPS) in which the pension amount is deposited. Every month 12 percent amount is deducted from the basic and DA of the employee and deposited in EPF. The same amount is also deposited by the employer.
But it is necessary to understand a little here, because the entire contribution of the employer does not go into the EPF account. Out of 12 percent of the employer, 8.33 percent goes to the EPF account, while 3.67 percent goes to the EPS account. But on opting for higher pension, there is a change in the employer’s contribution, about which you will know in detail below. First of all, let me tell you that the technical name of Higher Pension is (EPS-95).
What is EPS-95?
Answer- The government had implemented a new law in the year 1995 in the interest of the employees working in the private sector. The purpose of this law is that those working in the private sector can get the benefit of pension. It came into force in 1995 and is linked to pension. That’s why it is named EPS-95.
When this law was made, at that time the maximum wage for contribution to the pension fund was fixed at Rs 6,500. It was later increased to Rs 15,000. That is, 8.33 percent of this amount goes to the pension fund. Meanwhile, a change was made in the year 2014, after which the employee got an exemption of 8.33 per cent pension fund contribution on the total amount of his basic and DA.
Question- How to apply for more pension? (Most of the time this question is being asked…)
Answer- If you choose the option of higher pension, then you can contact the HR where you work. If you want to apply yourself, then you can apply for higher pension by visiting EPFO’s website. The process is very simple. You click on this link (https://unifiedportal-mem.epfindia.gov.in/memberInterfacePohw/) and you will have two options. If the employee has retired before 01/09/2014, and wants higher pension, then choose the first option. Whereas if you are not retired yet i.e. working then choose the second option. As soon as the working employees click on the second option, the Registration Request form will open in front of them. In which details including UAN, Aadhaar will have to be filled. As soon as you submit the form, you will go to the employer for confirmation, are you employed or not? Contribution for higher pension will start as soon as permission is received from the employer. You can apply online in 5 minutes. Most people are confused about the fact that they have not yet been given any information from the employer regarding higher pension. But the reality is that the employer has only this role to give consent to work in the institute on the option of higher pension chosen by you. Rest you can apply for higher pension online by yourself. There is facility offline also, for this you can go to EPFO office of your area. Not only this, EPFO is organizing camps for higher pension in different parts of the country. Where you can fill the form.
Question – Will the salary be reduced if I apply for more pension?
Answer- According to the rules, if an employee applies for more pension, then there will be no effect on the salary. The effect of the change will be seen in the employer’s contribution. If the basic salary and DA of an employee is Rs 20,000 per month, then accordingly Rs 2,400 is deposited in the EPF account from the employee’s share and the employer also has to contribute Rs 2,400. But not all the money of the employer goes into the EPF account. Under the new rule, 8.3 percent of the employer’s share ie Rs 1660 will start going to the pension account. The remaining Rs 740 will go to the EPF account. So far, the employer’s contribution to the EPS of Rs 15,000 basic and DA goes to the employee at 8.33 per cent i.e. Rs 1,249.50, the rest of the money used to go to the EPF account. But now from 2014 the wage cap on contribution to EPS has been abolished and the option of putting 8.33% of the total money of your basic and DA is open. That is, now out of the amount of fund that is formed by mixing basic and DA, there will be an option to put 8.33 percent amount in pension.
Question – Is the burden of higher pension going to fall on the employer?
Answer- The burden is not going to fall on anyone… neither on the employee nor on the employer. The amount deposited in the EPF account only on behalf of the employer will now go to the EPS account, that is, now 8.33 percent out of 12 percent will be deposited in the EPS account by the employer. The remaining 3.67 percent amount will be deposited in EPF. That is, more amount will go to the pension fund from the employer, while less fund will go to EPF.
Question – How much pension will you get, calculate yourself like this?
Answer – There is a formula for this… Pensionable salary x years of service / 70. Suppose 15 thousand rupees is basic + DA. And after working for 35 years, according to this, the monthly pension becomes Rs 7,500. Let us tell you, while changing its formula, the Supreme Court has declared the last 60 months of the job i.e. the average salary of the last 5 years as pensionable salary. According to this, if the average salary (Basic + DA) of the last 60 months of the job is 20 thousand rupees, then this amount has to be multiplied by the total years of the job, and then it will be divided by 70. In this way, there is a possibility of getting a pension of Rs 10,000 a month. If someone has one lakh basic + DA, then pension will be Rs 50,000 per month from this formula. Which is Rs 42,500 more than the formula with 15 thousand basic ones. With the basic formula of 15 thousand, pension was being made every month after 60 years of 7500 rupees.
Question – What is going to be the profit-loss of the employee on choosing higher pension?
Answer- Simply put, this change will reduce the lump sum amount after retirement. While the pension will start getting more. Balwant Jain says that this scheme has both advantages and disadvantages. If there are less years left in the job, then higher pension should be ignored. All the focus should be towards the lump sum amount. For such people, one should proceed only under the old system. But if there are more years left in the job, then it can be seen as an option. EPS-95 can prove to be a profitable deal for those with at least 20 years left in the job.
Question- Can retired employee also opt for higher pension, how?
Answer- Retired employee can also apply for higher pension. They will also get pension as per the new rule. But then more pension will be available when there will be more money in their EPS account. For this, the retired employee will have to put EPF funds in EPS. Retired employee will have to deposit EPF amount along with interest in pension fund for higher pension.
Let’s know the pros and cons:
(Under old system)-
If basic and DA in one’s salary is one lakh rupees, then under the old system, the employer’s contribution to EPF is Rs 10,750 per month i.e. 1.29 lakhs annually, under the formula, the employer’s total contribution to PF for 35 years of service is 45.15 lakhs. Will be Rs. Assuming an average interest of 8 percent per annum on this, the total amount would be Rs.1,94,92,177. That is, on retirement, an amount of about Rs 2 crore will come in the hands of the employee from the employer and will get a pension of Rs 7,500 every month.
(Under the new system)-
On the other hand, on a salary of 1 lakh, the employer’s contribution to EPF is Rs 3,670 per month i.e. Rs 44,040 in a year. In 35 years of service, the employer’s total contribution to PF becomes Rs 15,41,400. Assuming an average interest of 8% on this, the total amount will be Rs 66,54,639. That is, by contributing Rs 1,28,37,538 (Rs 1 crore 28 lakh 37 thousand 538), you will get Rs 42,500 as pension every month.
These advantages under the old system-
An equation comes out that if you make a fixed deposit of Rs 1,28,37,538 out of the total amount of EPF under the old system and get 6% annual return on it, then you will get Rs 64,187 every month and your entire money is also safe. Will remain However, this math has been worked out under the same salary for 35 years, so that you can understand easily. If more interest is received on FD, then the amount received every month will increase.
This is a big disadvantage of choosing higher pension-
On adopting higher pension, the increased pension fund will come under income tax. That is, in a way it will be considered as salary. There is a provision of tax on it according to the income tax slab. If you come under that purview, then you will have to pay tax. On the other hand, if you do not adopt higher pension, then your EPF fund remains completely tax free. That means you will not have to pay tax in the old system.
