This video shall explain if an employee shall choose the higher pension option in EPS-95 Scheme or get a higher EPF balance at the end of their retirement?
Dear Sir, Very good details, well said. May be one IMPORTANT advise most audience will be expecting is "At what life expectancy (#years) the pension scheme will become beneficial??'. A calculation like below:- Monthly salary: 100000 (1L) Total EPS contribution for 35 years (8330 x 12 months x 35 years) = ~35 L Monthly pension (1L x 35 / 70) = 50K Pension break even point for 35L (lumpsum) + Interest @6-8% = monthly withdrawal @50K wil be "7 to 8 years"...! So if a person has life expectancy beyond 66 years (58 + 8 years) the Pension ROI will work out. (Assumption rate of interest is between 6 - 8 %) I guess my calaculation correct, but please validate it. ~Dinesh
I have been searching for proper video to understand about the Higher pension Scheme. Got all my doubts clarified with this single video. Extremely helpful. Thank you.
One more point you may add to the presentation is that… The whole corpus in a bucket of EPS remains with EPF/ Govt and it’s not returned to the person after his/her death. So, in case of unfortunate event that the person dies in next few years of retirement, the amount recovered the by person is quite less compared to the accumulated corpus. Instead, take full corpus in a form of EPF along with yearly interest and then after retirement invest it into some good instruments/ LIC etc pension scheme where the guy would earn good monthly income plus entire corpus is also safe and available to the family upon unfortunate early death of the person.
no LIC, one must clearly understand which is the best instrument to invest. Mutual fund gives you around 15-18% on your total investment. please do some research before investing it
Nicely explained. Another risk is after serving 35 years and getting say eps of 40,000 pm he dies within 2-5 years,he loses all the benefit of higher pension. Further no other person becomes elligible for the 50% pension also.
Thank you so much for detail information.. I'm very clear after your watching video what to be done on higher pension scheme .. Gov employees may opt for this new scheme not for private employees
Very well explained. Regarding the point of salary getting reduced in the last few years because of any reason , is the catch for me and I guess should be for any private organisation employee. What government could have done better is that , instead of last 5 years they should have considered the best 5 years. This could have possibly made everyone happy.
Extremely helpful video. Thanks for clarifying a ton of questions that I had. 1 area which you didn't touch upon is the taxation part. How does the old vs new EPS option work out in terms of both TDS and also post retirement withdrawal (EPF)?
Can you please tell me how much money I will have to remit for a pension of 50 k per month as i retired in 2021 withdrawing all my PF. Please let me know
Even in old scheme EPFO does not consider 6 months average salary for pension calculation. The rule is average actual salary (subject to sealing) on you paid contribution x years of service / 70. Amount you will receive very less.
@jagoinvestor - When you say you can buy an annuity from various other options in the market, that appears misleading. I simple calculation would suggest an annuity from the market will give much- much less than what you will get through EPS in most of cases.
Thanks. 2008s spirit of Manish Chauhan. Simplifying tricky financial aspect of life and educate mass people. Like this video. Most relevant topic as on date but skipped by other financial influencers. I personally not opted for higher pension. Surprisingly some of my reasons exactly matching with yours.
Thanks for the crisp and clear explanation. Only one point which is not clear to me is - If only Employer contribution of 8.33% goes in to EPS box then why are they deducting the arrears from EPF? Does it not mean that Employer contributed lesser so they have to recover it from the Employer?
Tq so much, maneesh i too suggested my hubby same thing which u told maneesh, please add one more point in the list that if the private employees partner I.e. wife/husband if is working for govt sector no need of this eps scheme , because he or she will be getting pension , so they can go for epf scheme only, because me working in govt Sector, kindly add point
Good guidance Manish. One more point you should stress...pension is taxable fully while EPF lumpsum interest is not taxable subject to some conditions ..also employer contribution is not taxable ...any thoughts? These also make higher pension somewhat worse off.
Right points .. Yes, the points you mentioned are right .. I think most of hte people will not get such a big pension that it will get taxable as they will be above the taxable limits in most cases. Even at the moment no tax upto 7.5 lacs (close to 60K) pension.. IN future I am sure it will rise to 12-15 lacs after 10-12 yrs .. which means 1 lacs per month pension will not be taxable, Still it does not make too much sense to opt for higher pension in my opinion
Great insights. Thanks. I have a question.. What if someone plans to quit a company in India after say 10 years of working (with EPF & EPS contribution) & migrates to another country for good. He would then withdraw his accrued PF amount. Should this person continue with old regime or opt for new EPS rule?
Sir, As per higher pension formula ie ( last 60 month average salary × no. of years service/70), No insurance/ annuity company will give you as much amount as being rendered by EPFO as pension. This example ( my example) will make it more clear, an employee served for 19 years, average last 60 month salary is Rs.100000/-. So he will get 100000×19/70= Rs 28570 per month as pension. His EPS contribution is Rs.1900000/ only. No annuity providing company will give you annuity more than this pension.( Immediate annuity rate is 6% approximately which maybe Rs. 8000/- per month in this case.) Moreover, pension is concern with your security & lovely-hood and not for investment and making money. It's your decision now.
I think the decision to opt for higher pension will depend upon the corpus you will have to create. In my case i retired in 2021 from a pvt organisation taking all the PF money and now say for eg i want a pension of one lakh per month , how much money will i have remit to EPFO? That clarity at this point is not there.
That was really helpful video. I have one question though What would happen, if suppose a person leaves his job before the age of 58 and starts his own business
Very amature presentation, if not immature. As regards finance, you should understand discounted cash flow to figure out the actual viability, and as regards applicability, you should know more about behaviour and psychology. Long way to go for you young man.....
please share the taxation and interest part also, EPS is taxed where as EPF is not, also EPS contribution does earn interest where as EPF earns interest. ?
A few years ago, I transferred my EPF account from Chennai to Bangalore. However, while my EPF balance was successfully transferred, my service years were not transferred from one state to another. It is important to note that when you change jobs and move to a different state, you need to ensure that your service years are accurately tracked and transferred to avoid any discrepancies in your EPF account!
What is the CAGR of all the EPS deductions if calculation is done with the pension amount? Pl make a video on this ROI with couple examples. Thanks for this video 👍
Hello Sir, excellent video. One small query. Can I understand this in a different way like...if you are close to retirement, switching to newer pension would be beneficial and if you are far away to your retirement like 20 years gap wouldn't make sense to switch to the newer pension. is this correct sir ?
Thanks sir for the explanation. One more query. If some one goes for early retirement (say retires at 50) then how it will be calculated? From when pension will start, will it start from 50 years itself?
Sir, really helpful information. Could you share some idea for retired person. Based on your video, you mean to say, the amount invested by retired person will go to EPF and not into EPS. Does opting for joint option is good for existing pensioner? Please suggest.
EPFO does not give pension based on the average of the last year's salary (12 months) . The actual calculation is much below than that, (nearly below 40% of the max limit of Rs 7500/-). even if they have worked for more than 25 years (continuous period of working) and drawn a basic salary more than Rs 15000/- pm for the last 5 years. Till now it is not clear how they calculate it.
Same happened with my father in law. It's not a transperant organisation and very pathetic govt service. Better take out ur money and invest some where else.
Very Good information and Thanks. Can you please comment on what happens for people going in for early retirement ? for pension calculation , Does the average of last 5 years salary mean - the last 5 years in employment/ EPS contribution years ?
This time Manish and his team is not done proper homework for EPS higher pension. Current pension formula was wrongly explained. However max7500 is correct. How much should need to pump back to EPF box is not shown in the video. The details given very half heartedly. Normal I watch video , read blog of Jago Investor. Manish and Nandish both are good. This time they disappointed.
do private sector employees get pension from government through their EPS fund? I have never heard such thing. Please pardon my naivity. You are saying that only Employer part is getting divided between EPF & EPS funds... not our entire PF + VPF contribution.. correct? if true.. i don't think in long run too opting the higher pension will effect our corpus. because a big chunk (PF + VPF ) is getting deposited.
Hello Sir, Its a helpful video for me.. It cleared many of my doubts.. But there is a doubt.. My Father is a retired person, if he apply for EPS 95 so will he get higher pension? If he gets that what are other consequences he will have to face?
Sir my age is running 45 years..... i opted the EPF from 2010..... as per rule for HPS ...35 year should be there..... the retirement age is considered 58 years.... my have left arounfd13 years to reach the retirement age...... so 22 years amount will be deducted from my EPF account???? and how it will be calculated???
Very informative. Is there a calculator that will give the amount of money that should be transferred from EPF to EPS if we provide the salary for the last 5 years? Thanks
In one video, one said it would be calculated from the first day of joining (or from 1995 whichever is later). So, you have to take the basic of every month, take 12% of the employer side, minus 1250 as it is already submitted, and take 8% interest on every instalment, which will be deducted. (I might be wrong)
