Is Employee Pension Scheme Is A Benifit - XLS Download

Hi All,

As per Employee Pension Scheme people who happen to be member of this scheme for more than 10 years would get a monthly pension after he attains the age of 58. Calculation would be done as follow:

Member's Monthly pension : Pensionable salary X Pensionable Service
70
Example- Pensionable salary is max Rs 6500/-
Pensionable Service would include number of years severed for all employers if PF account were getting transferred to new employer every time. Here any fraction of year more that 6 month would be taken as 1 yrs and less than 6 month will be ignored.

Lets say if qualified salary was Rs 20000/- and service period was 20 yrs, so amount of monthly pension would be (6500*20)/70= Rs 1857/- only

Now if we see how much an employee had contributed (assume that from starting salary was more than 6500 pm.) so total contribution would be

(8.33% of 6500)*20 yrs = Rs 129840/-

So I think it is loss for an employee because if Rs 541/- (8.33% of 6500) would have been invested in PPF account for 20 yrs. He would get an amount of Rs 3.18 Lakh if ROI is 8% (Refer attached file) which is very much likely.

From EPS as pension if someone receives the monthly pension amount for 14 years then this amount totals to Rs 3.18 lakh during that period future interest can be earned.

Can I get an expert view on this if I am missing something.

Dear Nikesh,

The Employees’ Pension Scheme – 1995 has attracted a plenty of discontentment and protest, before and after its implementation; which might not have raised against any other social security legislation in India. Despite such huge criticism and demand for better benefits from various corners, none of the Union governments have shown interest to incorporate any amendments to the Scheme in favour of PF members after the enactment dated 29.2.96. Instead a few benefits were either taken away or decreased.

But in your above posting a few mistakes or missings are happened as under.

1. You mentioned that more than 6 months of service will be taken as 1year. This is to be corrected as 6 months or more.

2. For 20 years and more, two years' bonus will be added to the actual service. While calculating pension this is to be taken care off.

3. In the last 40 years the ceiling limit of salary for PF is enhanced from 1000 to 1600, 1600 to 2500, 2500 to 3500, 3500 to 5000 and 5000 to 6500. While comparing the benifits against contribution it is to be taken into account.

Abbas.P.S

Thanks for your reply.
Yes what you menioned here, I have seen in the act also.
But on benifit part it is purly wastage of our hard earned money. It is more worse for less paid employees.
Regards,
Nikesh

Dear Nikesh
Why you are thinking that it is a pension scheme?
Think it is a savings only, which you can get it at the time of your old age.
After the age of pensional period, please submit your form 19 and form 10C and claim the entire amount, It is upto you to decide whether to opt for pension or not.
In our old age it will be really beneficial either if you draw pension or draw the lump sum.
So Never have the negative feeling in PF contribution now itself.
With warm regards
S. Bhaskar
9099024667

Dear Bhaskar,

I don't have negative feeling for PF because it gives us the most consistent and completive interest rate and treat it a great saving.
But pension fund is loss for us because it could have been used in better way, can see this in my attached file where I have taken an example of PPF (which is also a govt saving scheme) which give you more flexibility.

So it’s all about the maximum utilization of fund which is our right. Right now we give our contribution for whole life of service and then get that money without any interest.

Regards,

Nikesh
9871001868