Employee’s pension scheme: Exciting news for private sector employees! A possible reform of the Employee Pension Scheme may increase the minimum pension from Rs. 7,500 to Rs. 25,000, showing a significant increase. Find out the details and implications of this potential change.
The Employee’s Pension Scheme 2023 ( Employee’s pension scheme 2023 ) is all set to undergo a major overhaul to provide relief to the private sector employees. At present, the minimum pension amount is Rs. 7,500 is. However, a revolutionary change took this figure to an impressive Rs. can increase up to 25,000, exceeding expectations and providing financial security to retired workers. In this article, we will explore potential changes to EPS and examine the consequences for employees.
Employees Pension Scheme 2023 of EPFO-1995
The Employees’ Provident Fund Organization (EPFO) administers the Employees’ Pension Scheme-1995, ensuring that all subscribers to the Employees’ Provident Fund (EPF) receive pension on reaching the age of 58 years. To be eligible for this scheme, employees must have completed Minimum ten years of service. Both the employee and the employer contribute 12% of the former’s salary to the EPF, with a portion of the employer’s contribution allocated to the EPS.
Pension calculated at Rs. 15,000 is.
Currently, the Employee Pension Scheme has a maximum pension of Rs. 15,000, calculated on the basis of the basic pay of the individual. If the employee’s monthly income is more than this threshold, the pension is fixed only on a maximum salary of Rs. 15,000 is.
Advanced calculation based on last salary
The proposed changes in EPS may provide significant relief to employees if the calculation of pension is based on last pay, which represents a higher salary bracket. Currently, individuals must contribute to the EPF for ten years to be eligible for pension. Additionally, two years weightage is given after completing 20 years of service. By removing the pension ceiling, the impact on pension calculations is clear.
Abolition of Rs 15,000. Limitation on EPS pension
Under the current system, assume an employee has completed 15 years of service, starting from January 1, 2022. In this case, the pension received through the Employee Pension Scheme is Rs. will be limited to 15,000 is.
Whether the basic pay of the employee is Rs. 20,000 or Rs. 30,000, the pension he will get after completing 15 years of service commencing on January 2, 2037 , amounts to about Rs. 3,000 is. The pension calculation formula is as follows: Service history x 15,000/70. However, once the pension limit is removed, the pension of the same employee will increase accordingly.
Employee’s pension scheme 2023 Example No. 1
Consider an employee with a salary (basic pay + DA) of Rs. 20,000 is. Applying the formula of the Employee Pension Scheme, his pension amounts to Rs. 4,000 (20,000 x 14)/70 = Rs. 4,000 is. Similarly, a higher salary will lead to higher pension benefits. For such individuals, the pension can see a significant increase of up to 300%.
Employee Pension Scheme 2023 Example No.2
Suppose an employee has served for 33 years, his last basic pay is Rs. 50,000. Under the current EPS system, the calculation of pension is limited to a maximum salary of Rs. 15,000 is.
However, if we remove the pension limit and include calculation of pension based on last pay, the employee will get a pension of Rs. 25,000 is. Applying the formula: 33 years + 2 = 35/70 x 50,000 = Rs. 25,000 is.
333% increase in employee pension scheme 2023
EPFO rules state that if an employee contributes continuously to EPF for 20 years or more, the additional two years of service accrue to him. Thus, if an employee has completed 33 years of service but the pension is calculated for 35 years, the amount received by the employee pension scheme will increase by a staggering 333%.
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conclusion
Possible change of Employee’s pension scheme Rs. 7,500 to Rs. Brings hope and financial security to 25,000 private sector employees. With the removal of pension ceiling and calculations based on last pay, individuals will benefit significantly. This expected change is aimed at uplifting retired workers and ensuring a prosperous future during their golden years. Stay updated for further developments regarding this promising change in EPS.
FAQ For Employee’s pension scheme
Q: How is pension calculated under employee pension scheme?
A: Currently, the employees and employers contribute 12% of their basic salary and dearness allowance to the EPF. Of the employer’s 12% contribution, 8.33% goes to the Employees’ Pension Scheme (EPS) and 3.67% to the EPF.
Q: How to calculate employee pension scheme with example?
A: If you don’t opt for the higher pension: The EPS pension is calculated on the average of 60 months’ average pensionable salary at the time of retirement. For example, if you joined EPS at the age of 25 and retired at age of 58 then you may get Rs 7071 as a monthly pension [(Rs 15000×33)/70].
Q: What is the formula for pension calculation for EPF?
A: Currently, the formula for calculating pension under the EPS scheme is equal to:=(Average salary of 60 months X service period) divided by 70.