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.
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
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)?
@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 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?
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
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.
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
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
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?
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.
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. ?
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
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.
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
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 👍
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.
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 ?
Right, even i can't see my service history in EPF portal. i transferred my pf balance to new one but still service history is missing for pre UAN period.
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
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?
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.
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)
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.
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.....
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???
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.
If I get this higher pension from my retirement with all arrears I will get lump sum amount that may be equal or more than that of my lump sum amount to be paid.please clarify this is I am right or anything missing.
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 ?
When you max pension in the old scheme is 7500, are you referring to monthly pension or yearly? Similarly in the other slides also the duration was not clear. In the example, When you say base salary is 1 lac , are you talking about the monthly salary or the yearly salary
Sir, Last two years, My company is not putting 1250 in pension contribution and they are putting complete 12% share in the Employer contribution itself. Do you have any idea?
Sir, I retired in 2007. At present I am getting only Rs.1206.-- As a result of this current judgement will I get higher pension if so what I should do?
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.
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.
Contribution from which year to be paid for 2014.12.01 retired Basic plus DA per month 1.25L. Is it worth to pay so many Lakhs. And if Pension is stopped for some reason. Definitely we don't get back our contribution paid. How anyone can accept that a pensioner can pay in lakhs towards contribution. If he was so capable then he don't need pension at all. One more thing if the contribution money is kept in FD we get atleast half the pension. And we can take back deposited money any day
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.
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
Thank you so much Sir , This is the clearest explaination On Epf95 till date👍👍👍👍👍
extremly clear narration .. what if a person stops being employed at fifty three .. what will be the last yrs average
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)?
@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 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?
Thanks dear.................for making the things more clear......to take right decision.
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.
@Deomay thanks, that actually a very strong point of consideration
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
He has already covered that point in the video
last point on 'shall you accept' is eye opener for currently high paid salaried. explained very well in short time.
Very Informative and easy understand video, thanks a ton for such nice explanation.
The Best explanatory video . really helpful information... big thanks..!!! Decided not to go for it .. 🤓
what happens if someone had withdraw the PF in the middle, say before 2014, how is the calculation affected
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.
Now even in the old way, it is 6 years average salary and capped at 15k.
Very well said brother !! like the simple way of explaining the concept . Thanks !!
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
Many Many thanks Sir. It was great clarity. Much appreciated.
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
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?
Very clear explanation thanks for making understanding the
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.
oh you provided lot of clarity on this issue..thanks a lot..👌👍👍👍
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. ?
Excellent information, thank you so much for this info jagoinvestor
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
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.
What will happen if till 45 basic is 100000 and retired ?any idea how pension is going to be calculated ?
Explained very nicely 👌 👌. Thanks
Thanks dude.. no one explained this much clearly
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
Simple and clear. Thank you!!
Very very nicely explained dear
Excellent analysis. Tjank u.
What about DA? Why are you not taking DA into consideration??
Liked your explanation! This will definitely help me to take a call for myself.
Will the pension fixed at the age of superannuation will attract D.A. to combat inflation .
Very much useful. Thanks alot.
Very good elaboration
In absence of Inflation beating pension is the scheme really going to help over time? Doubt remains.
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 👍
Thank you for detailed information.
Thank you! I have a better understanding of the higher EPS scheme now.
Service count from 1995 or what about earlier service before 1995
As per you example in the video is 55000 pension monthly in the new pension scheme and old pension scheme was 7500 monthly
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.
Very helpfull Thanks a lot.
you deserve all the praises
Thanks, Explained very Simple way
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 ?
i think monthly income here means only 'Basic' . not the complete in hand salary
Monthly income means Basic +DA
Cld u clarify on pension being fixed?
Right, even i can't see my service history in EPF portal. i transferred my pf balance to new one but still service history is missing for pre UAN period.
Thats one big issue most people are facing .. you need to check that out with EPFO department
@@jagoinvestor i opened grievance ticket 2-3 times but no luck. They just close ticket with some comments.
BEAUTIFUL VIDEO.Very useful sir
Excellently explained.
Very good video indeed.
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
Thanks a lot. Very informative
What Happens if the person retires early say and 50 and does not take any job, Average salary from 45-50 is taken for calculation ?
very informative. Thanks for creating this one
Excellent information, thank you so much for this ❤
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?
This should be answered.
If a person who is in service opts for this EPS how much amount of EPF will have to be put in EPS to get the desired EPS
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.
I retired on 01-08-2018.can i get arrears in higher pension scheme?
Very helpful video
Excellent explanation Keep Rocking
Thanks and best wishes for your future work.
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)
Thanks for clarity..now i can decide..
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 sharing
I am working in an organization which trust. I believe still amount going to pension. How should I avail this?
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.....
"if you don’t like EPFO as an organization and want to not engage with them post-retirement" - what a silly point?! Juvenile!
Excellent video
Thank you. Well explained.
12% is calculated on basic plus DA and not just basic
Very well explained. Thank you
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???
Excellent analysis. Helped to make my decision. Thank you 🙂
Thanks. @jagoinvestor sir Can you please comment on Tax treatement on PF withdrawal vs Pension
PF withdrawal will be taxfree
Pension will be taxed at slab rate just like normal income .
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.
I think there is no such rule of 35 maximum service years. It is nowhere written in EPS rules
If I get this higher pension from my retirement with all arrears I will get lump sum amount that may be equal or more than that of my lump sum amount to be paid.please clarify this is I am right or anything missing.
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 ?
Hi Sir
This is the exactly my Question is as well...Can we have the kind answer Sir.
It's very helpful.. thank you..
Explained really well
Hi Can you give consultancy to us for this
When you max pension in the old scheme is 7500, are you referring to monthly pension or yearly? Similarly in the other slides also the duration was not clear. In the example, When you say base salary is 1 lac , are you talking about the monthly salary or the yearly salary
It is monthly
Thanks sir. It really meaningful
Great video. Very helpful. Thanks a lot.
What will happen if I stop working at the age of say 50 ?
My father got retired 2 years ago, now if we opt new pension system, will we get an arrear of two years?
Arrear is not in any case for EPS. It is always prospective. No arrears will be given by EPFO.
Nice crisp information
What if someone dies soon after retirement and say no spouse or so won't they loose all their eps amount ?
Yes.. they will loose it .. and if they live till 120 .. they will keep getting pension .. that's what annuity is all about
Sir, Last two years, My company is not putting 1250 in pension contribution and they are putting complete 12% share in the Employer contribution itself.
Do you have any idea?
What happens if you opt for early retirement say at age 50, but want pension only when you are 58 and have worked for 20+ years?
same question
This is nice.. very helpful.
Sir, I retired in 2007. At present I am getting only Rs.1206.-- As a result of this current judgement will I get higher pension if so what I should do?
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.
Well explained. Thank you.
Nicely explained
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.
12% is calculated on Basic plus DA
Contribution from which year to be paid for 2014.12.01 retired
Basic plus DA per month 1.25L.
Is it worth to pay so many Lakhs. And if Pension is stopped for some reason. Definitely we don't get back our contribution paid.
How anyone can accept that a pensioner can pay in lakhs towards contribution. If he was so capable then he don't need pension at all.
One more thing if the contribution money is kept in FD we get atleast half the pension. And we can take back deposited money any day
You didn't reply