EPFO Higher Pension Scheme 2023: EPFO subscribers can apply for higher pension under the Employees Pension Scheme, 1995 (EPS 95) till May 3, 2023.
EPFO Higher Pension Option: Employees’ Provident Fund Organization ie EPFO has given its eligible subscribers the opportunity to choose a higher pension option. Under this, EPFO has extended the application deadline (EPFO Higher Pension Deadline) till May 3, 2023, to get more pension. However, there are many questions in the minds of the employees regarding this. Every employee wants to know whether the option of higher pension is right or not and whether one should invest in it or not. There is also a question about how beneficial this scheme can be for the employees and how much their salary is going to increase by choosing this option. So let’s know the answers to all these questions one by one.
Know what is Employees Pension Scheme (EPS)?
Employees’ Pension Scheme ie EPS came into existence in November 1995. Under this pension scheme, Employees’ Provident Fund Organization (EPFO) gives pension to the employees after retirement. When this scheme was implemented, at that time the employee used to contribute 12 percent of his basic salary (with dearness and some other allowances) to EPFO. In return, after retirement, the employees used to get a fat retirement fund with strong interest on the total deposited amount. But then changes were made in the rules of the Employees Pension Scheme. Under this change, the contribution of 12% to EPFO by the employee’s organization was divided into 2 parts 8.33% and 3.67%.
Now a large part from the employee’s organization i.e. 8.33% started going to EPS and 3.67% started getting deposited in EPF. The limit of pensionable income for this deduction which was earlier 5000, has also been increased to 6500. This limit remained in force till 1 September 2014.
EPFO made important changes in the rules of pension scheme
In August 2014, EPFO changed the rules of EPS once again. After which the limit of pensionable income was increased from Rs 6,500 per month to Rs 15,000. Along with this, the employees were given the option that they can contribute to EPS according to their actual basic salary. For this they have to apply in their institute. On the other hand, if an employee does not apply for this, then the contribution to EPS from his basic salary will be made according to the maximum limit of Rs 15,000.
Understand this in simple words, whatever your income is, your contribution to the Pension Fund will be made at the rate of 8.33% of Rs 15,000. If you look at it month-wise, you will have to contribute a maximum of Rs 1,250 every month and the remaining amount will be deposited in the EPF.
The Supreme Court gave this order regarding the pension scheme
In the year 2014, all the employees were given a deadline of 6 months to opt for this scheme. Which was later extended for 6 months with certain conditions. But then many employees applied in the Supreme Court that the time given to understand the changes made in the pension scheme in 2014 and to choose the scheme was not enough. Many employees could not take advantage of this due to lack of information. The Supreme Court had said in its order on November 4, 2022, that EPFO would be given four months to choose the higher pension option for all eligible members. Will have to give time.
EPFO extended the deadline to apply for higher pension
Following the court’s order, EPFO had extended the date of application for higher pension by four months. This four-month period ends on March 3, 2023. Because of this news was coming that its deadline is March 3, 2023. But recently once again EPFO has extended the date of application in the scheme to get more pension. After which, under the Employees Pension Scheme, 1995 (EPS 95), EPFO subscribers can apply to get higher pension (EPFO Higher Pension Scheme) till May 3, 2023.
Know how much pension will increase from Higher Pension Scheme
Suppose your basic salary is Rs.50,000. In this case, under the old pension scheme, your pensionable salary will be Rs 15,000. Of which 8.33% i.e. Rs 1,250 will be deposited in the pension fund. On the other hand, when you opt for higher pension, then its contribution to the pension fund will be according to your actual basic salary of Rs 50,000 i.e. around Rs 4,165.
How beneficial is the option of higher pension for employees?
How beneficial is this scheme for you, should you opt for it or not? To understand this, BQ PRIME spoke to Pankaj Mathpal, Founder and CEO of Optima Money Managers. He says that at present no clear information has been given by EPFO on the calculation of pension. In such a situation, while choosing the option of this scheme, the employees should decide keeping in mind two factors. In which the first factor is that if the employee needs more lump sum amount after retirement, then the old pension scheme can be better for him.
On the other hand, the second factor is that if an employee needs more pension every month, then it will be beneficial for him to apply for more pension scheme.