Update of the pension system for employees: There is a constant demand to remove the ceiling on the pension system for employees. The Supreme Court is now also considering the case. For this, a bench has been prepared by the Supreme Court, which can give a decision in the interest of the employees after having heard the case carefully and taken note of the views of both parties. In the current framework, there is a maximum limit or limit of Rs 15,000 per month for pensions under the EPS system.
Update of the pension system for employees
The pension system for employees is a good savings system for those who work in the private sector. It is called a pension fund because some is deducted from the employee’s salary during work and some is put into the maintenance fund and some is put into the pension system for employees. Employees receive the entire PF amount in a lump sum at the age of 58. However, the pension amount is determined monthly. There is a formula for determining the EPS pension.
What are the rules now?
When an employee becomes a member of the Employees’ Provident Fund, he also becomes a member of the EPS. The contribution of 12% of the employee’s basic salary goes to PF. In addition to the employee, this part also goes to the employer’s account. But part of the employer’s contribution is deposited in EPS, ie. employees’ pension system. The basic salary contribution in EPS is 8.33%. However, the maximum limit for pensionable salary is Rs 15,000. In such a situation, only a maximum of Rs 1250 can be deposited in the pension fund each month.
understand with examples
According to the existing rules, if the basic salary for an employee is Rs 15,000 or more, Rs 1250 will be deposited in the pension fund. If the basic salary is Rs 10,000, the grant will only be Rs 833. The calculation of pension upon retirement of the employee is also considered as the maximum salary of only 15 thousand Rs. In such a situation, after retirement, employees can only receive Rs 7,500 as a pension according to the rule (pension system for employees).
What happens if the 15,000 limit is removed?
According to Bhanu Pratap Sharma, retired supervisor of EPFO, if the limit of 15,000 rupees is abolished from the pension, more than Rs 7,500 (Employee Pension Scheme) pension can be received. But for this, the employer’s contribution to EPS must also be increased.
How is the pension calculated?
Formula for EPS calculation = Monthly pension = (pensionable salary x number of contributions to EPS account) / 70
If one’s monthly salary (the average of the last 5 annual salary) is Rs 15,000 and the duration of the job is 30 years, he will receive a pension in the pension system for employees of only Rs 6,828 per month. If the limit of 15 thousand is removed and your salary becomes 30 thousand, you will receive a pension according to the formula. (30,000 x 30) / 70 = 12,857
Existing conditions for pensions (updating the pension system for employees)
- Must be an EPF member.
- Must be at work for at least 10 regular years.
- Pension is paid at the age of 58. Possibility to take out a pension after 50 years and also before the age of 58.
- When you take out the first pension, you receive the reduced pension. For this, form 10D must be filled in.
- When the employee dies, the family receives a pension.
- If the service history is shorter than 10 years, they are given the opportunity to withdraw the pension amount at the age of 58.
EPS is part of your salary
Like the EPF, the EPS (Employee Pension Scheme) is also part of the employee’s salary. At least 1,000 to 7,500 Rs are available as a pension each month in EPS. But most people do not know how the pension plan for employees is calculated.
EPS formula: Update of the pension system for employees
12% of the employee’s basic salary is deposited in the PF account. The employer’s contribution is also the same. But part of the employer’s contribution is deposited in EPS, ie the pension fund. The basic salary contribution in EPS is 8.33%. However, the maximum limit for pensionable salary is Rs 15,000. In such a situation, only a maximum of Rs 1250 can be deposited in the pension fund each month. Employee pension secures the future!
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