Introduction:
The last day for submitting applications for a larger EPS pension based on actual basic pay rather than the statutory cap of Rs 15,000 has been delayed to July 11th. Here is all the information you require on eligibility, the process, and the calculation. Does it merit your time? The Employees' Provident Fund Organisation (EPFO) and the Labour Ministry have agreed to move the June 26 application date for enhanced pensions to July 11.
Employers have been given an additional three months to finish the procedure of verifying the wage information. As per the previous deadline, the last date was 26th June but as mentioned the deadline might be pushed back by 15 days, according to a previous report.
Latest update:
To guarantee a consistent pension income after retirement, 8.33 percent of your employer-contributed provident fund (EPF) contributions are currently allocated to the Employees' Pension Scheme (EPS), 1995. Yet the prescribed maximum of Rs 15,000 is the basic pay (or earnings) taken into account for the calculation. Thus, only Rs. 1,250 (8.33 percent) of the total of Rs. 15,000 is allocated to EPS, with the remaining amount going to your EPF.
Employees' pension income would likely be significantly larger if they chose to make contributions based on their real basic wage, which is the basis for calculating EPF contributions. After accumulating a minimum of 10 years of service, an employee is qualified to receive a pension.
Until June 26, anyone who wishes to apply for a higher pension that will be provided by the EPFO may do so. Yet, there are many unanswered questions about the mechanism that the retirement funds body implemented following a Supreme Court decision in November 2022.
Numerous prospective applicants have been kept in a state of confusion despite several circulars that clarified the application process, eligibility requirements, and methodology for calculating the increased pension as well as the introduction of an online calculator. Some people tweeted that they were having trouble finishing the procedure and asked for explanations. The huge number of complaints has prompted eligible retirees, workers, and businesses to call for a delay.
"Employers are required to provide joint verification because the employees' EPFO pension records are at least eight years old and relate to earlier years. Because these entail money transactions, extensive verification is required.
Who may apply?
Since September 1, 2014, two groups of employees and retirees are qualified to apply for higher pensions based on actual salaries as opposed to the previous restrictions of Rs. 6,500 and Rs. 5,000 or the statutory salary maximum of Rs. 15,000.
You must apply for request verification if you resigned before September 1, 2014, and you used your employer's mutual choice to seek a higher pension at that time. You won't be qualified to apply today if you left before this date but did not choose the higher pension choice. You can submit an application jointly for a higher pension if you worked before September 1, 2014, i.e., if you were an EPS member, and you are still employed.
To finish the registration process, go to EPFO's member portal. To continue with the application, you will want your UAN (universal account number) or pension payment order (PPO) numbers, Aadhaar-linked mobile numbers, and previous wage records, among other things.
The company you work for will need to verify your information once you've submitted it. In your records, an acknowledgment number will be produced. The request will then be verified by the field officers of the EPFO, clearing the way for the release of pension payments once they become due. Yet, you will need to make up the gap retroactively if you haven't been paying into your pension while earning a greater wage all this time. It will be determined how much must be taken out of your provident fund account.
As a substitute, you can pay back previous dues out of your own pocket. Additionally, 1.16 percent of your employers' contribution will be transferred to EPS, bringing the total to 9.49 percent rather than 8.33 percent.
The date on which your pension started to be calculated is connected in the EPFO's June 14 circular. As a result, for persons who retired and started receiving pension payments before September 1, 2014, the pension will be determined using the average monthly income received during the 12 months preceding retirement (or withdrawal from the pension fund).
The pension will be determined using the average monthly earnings during the 60 months directly prior to retirement (or leaving the pension fund) for people who retired (or whose pension distributions have started) or will retire after this date.
Issues that could occur:
The largest obstacle is the absence of information about the sum that must be taken out of your provident fund. This is to make up for the loss from previous years when you failed to contribute to EPS on the basis of your actual wage.
On its member portal, the EPFO includes a tool for calculating overdue dues. It is not, however, a simple task. To generate a precise computation, many employers and employees are denied access to their whole basic wage history throughout the years. The EPFO's choice will also be decisive.
Process of calculation
Pension = pensionable salary (average of last 12/60 months' salary) x number of years of contribution / 70 will be used to compute it. According to experts, it is possible that the concept of a pensionable salary could evolve in the future, which would have an impact on the amount of a pension and would raise the overall level of ambiguity.
The amounts determined by the calculator are only an approximate approximation. As per the website of EPFO, the "actual dues are determined on the basis of records by the concerned Regional Office of EPFO which are credible. This basically implies that workers or retirees will have to submit the application even though they are unsure of the exact amount they will need to transfer to EPS.
"Accessing historical records is difficult since many people wouldn't have kept their copies. The EPFO should have disclosed the information in advance to allow members to make an informed choice that will be based on the amount that must be moved from their EPF to EPS, according to Pankaj Mathpal, founder of Optima Money Managers. In fact, people who have retired by now got their PF fund will need to use their existing resources to make arrangements for the past dues.
Conclusion:
Additionally, employees will need to take into account their current age and health. What when they do not live to be, say, 75 years old? The spouse will be eligible for half of the pension. According to Kuldip Kumar, a partner at Mainstay Tax Advisors and a separate entity personal finance expert, "the remaining corpus designated for EPS will not be returned to the dependents." On the other hand, the PF corpus is yours forever.
Members will have to, in a way, take a leap of faith because the EPFO has not explicitly said whether they will be allowed to cancel their applications after the EPFO cites the sum owing. Only when their employers have approved their applications may they withdraw or reapply.
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