Thursday, February 2, 2023

Pension Plan: Your retirement income will be doubled! Is the Rs 15000 cap going to be removed? Now you know how much you’ll get

Employee Pension Scheme: The employee’s pension is fixed when he or she retires. However, because there is a limit, the pension after retirement is not very high. As a result, there is a demand to eliminate this restriction.

Pension Plan for Employees: The Supreme Court is currently hearing cases on removing the investment cap under the Employee Pension Scheme on a daily basis. But how does this hearing and this situation relate to you? What impact will this have on your life? We will explain everything to you.

What exactly is the issue with the EPS restriction being removed?
Before we go any further, let us first define what this issue is all about. The maximum pensionable monthly pay is currently Rs 15,000 per month. That is to say, whatever your pay is, the pension computation will be based on Rs 15,000 only. The case is currently in court to eliminate this restriction.

The Supreme Court deferred the hearing of a batch of petitions filed by the Union of India and the Employees’ Provident Fund Organization (EPFO), alleging that employees’ pensions cannot be limited to Rs 15,000, on August 12. From August 17, 2021, these cases will be heard on a daily basis.

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What are the current EPS regulations?
When we begin working and become members of the EPF, we also become members of the EPS. The employee contributes 12% of his salary to the EPF, which is matched by his employer, but a portion of it also goes to the 8.33 percent EPS. As previously stated, the maximum pensionable pay is currently just 15 thousand rupees, implying that the monthly pension portion is only Rs 1250 (8.33 percent of 15,000).

Even after the person retires, the maximum salary for calculating pension is only Rs 15,000. As a result, the maximum pension an employee can receive under EPS is Rs 7,500.

This is how pension is calculated
One thing to keep in mind is that if you started contributing to EPS before September 1, 2014, your monthly salary limit for pension contributions will be Rs.6500. If you joined EPS after September 1, 2014, your maximum compensation will be Rs15,000 per year. Now let’s look at how a pension is computed.

Formula for EPS Calculation
Monthly Pension = (Pensionable Salary x Years of EPS Contribution)/70
Here assuming the employee started contributing to EPS after 1st September, 2014, then the pension contribution would be Rs 15,000. Suppose he has worked for 30 years.
Monthly Pension = 15,000X30/70 = Rs 6428

Pension Maximums and Minimums
Another thing to keep in mind is that an employee’s service of six months or more will be counted as one year, while service of less than six months will not be counted. In other words, if an employee has worked for 14 years and 7 months, he or she will be deemed to have worked for 15 years. However, if you have worked for 14 years and 5 months, just 14 years will be counted. The minimum EPS pension is Rs 1000 per month, with a maximum of Rs 7500 per month.

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