Your uncle's decision to opt for a higher pension scheme under the Employees' Pension Scheme (EPS), considering his retirement age and the working tenure, can be a wise move. Here is how the pension would be calculated and the potential advantages and disadvantages:
💼 Calculation of Pension:
The formula for calculating pension under EPS is (Pensionable Salary * Pensionable Service) / 70. Assuming the average basic pay of 1 lac, the calculation would be as follows: (1,00,000 * 15) / 70 = Rs. 21,428.57 per month.
However, please note that under EPS, the maximum pensionable salary is capped at Rs. 15,000 per month. So, if your uncle opts for the higher pension by contributing on his full salary, the pension amount might be considerably higher but it will be subject to the approval of the EPFO.
🔮 Advantages:
1. Higher Monthly Pension: The primary benefit is a higher monthly pension, which can provide financial stability post-retirement.
2. Inflation Protection: The higher pension can help to counter inflationary pressures over time.
🛂 Disadvantages:
1. Higher Contributions: To opt for a higher pension, your uncle would have to retrospectively deposit higher contributions with interest.
2. Approval Risk: The EPFO has been reluctant in many cases to provide a higher pension on full salary, and there are many cases pending in courts.
Here are the steps your uncle can take to opt for a higher pension:
1. 💼 Submit an application to the EPFO to contribute on full salary retrospectively. This application should be made through his employer.
2. 🧶 Deposit the difference in contributions for the past years along with interest.
3. 🆚 Keep updated with the latest court rulings and EPFO circulars on this matter.
Remember, it's always recommended to consult with a financial advisor or pension expert before making such decisions. They can provide a detailed analysis based on your uncle's specific financial situation and future needs.