EPFO Higher Pension Link (unifiedportal.mem-epfindia.gov.in) activated: Contributing to Employees Pension Scheme (EPS) from before 1 September 2014? You are now eligible to exercise the joint option for a higher pension provided by the Employees Provident Fund Organisation (EPFO). The higher pension application link is available on EPFO’s unified portal.
The announcement of the higher pension option has resulted in a lot of confusion among EPFO subscribers as to whether they should go for this or not. While several reasons are there to avoid the joint option, there are equally strong reasons why you should apply for a higher pension if you are eligible. The last date to do so is May 3, 2023. That said, the following are five good reasons to apply for the higher pension option. (Also Read: Who should apply and who should not)
1. Chance to get a higher pension
If you have been contributing to EPS from before 1 September 2014, you now have a one-time opportunity (till May 3) to secure a higher pension to fund your post-retirement life. Calculations show that a person drawing an average basic salary+dearness allowance (DA) of Rs 40,000 in the last 5 years can get a monthly pension of around Rs 20,000. For someone with an average basic salary+DA of Rs 1 lakh, the assured pension under EPS may be up to Rs 50,000.
Also Read: 5 reasons to avoid higher pension option
2. Guaranteed monthly pension income
We are living in a time when nothing is guaranteed. Even bank FDs have a deposit insurance guarantee of only Rs 5 lakh while many other savings schemes come with various deposit limits. Investing in market-linked products like stocks and mutual funds is subject to market risks and volatility. Moreover, there is an everyday hassle of managing your money. For post-retirement life, no one would like to go through the hassles of managing money. Hence, the EPFO’s higher pension option is a good opportunity that you should consider.
3. Your EPF corpus may decrease, so what?
One argument against the higher pension option is that your Employees Provident Fund (EPF) corpus will decrease. If you have been contributing to EPFO above the pensionable salary cap of Rs 15,000 since before 1 September 2014, opting for the higher pension would lead to the readjustment of EPF and EPS funds to account for lost years. But then a lesser EPF corpus would mean a higher EPS pension and peace of mind in your post-retirement life that you cannot ignore.
“The higher pension option is beneficial to those who want a higher monthly pension and don’t want a huge Lumpsum amount on retirement. The contribution to a higher pension will increase the monthly pension amount and reduce the lumpsum EPF amount on retirement,” says Pratik Vaidya, MD and CVO, Karma Global, an HR and Compliance Organisation.
“The employees who have other investment options and will receive a lump sum amount on its maturity can opt for a higher pension,” he adds.
Also Read: Higher pension last date extended
4. No risk
Unlike NPS and other schemes, where returns are linked to market-based investments by fund managers, there is no risk to your funds under EPS. You will get the monthly pension as per your eligibility and the average last drawn 5-year salary.
EPS is a defined benefit scheme. This means you can be assured of the monthly pension even in the worst of times.
At present, the pension is subject to a maximum basic salary+DA of Rs 15,000. So if an employee is drawing a basic pay of Rs 15,000 for the last five years, s/he would be eligible for around Rs 7500 per month pension. However, this is now extended to employees who have been making EPF contributions above the Rs 15,000 cap, subject to the condition that they have been contributing to the pension scheme since before 1 September 2014.
5. Truly welfare measure: Pension continues after death
Under EPS rules, the monthly pension will continue to the family even after the death of the EPFO member. Further, the pension will also be available to handicapped children or dependent children till they acquire the age of 25.
End note
The higher pension option may be beneficial for some subscribers and may not be for others. Therefore, you should assess your individual situation before deciding whether to go for the higher pension option or not.