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Higher EPFO ​​pension: Why you shouldn’t go for it


In line with the Supreme Court directive, the Employees Provident Fund Organization (EPFO) has extended the deadline for applying for higher pensions by 60 days. Through the single membership site of pension fund organization EPFO, all eligible participants have until May 3, 2023 to choose together with their employers and submit an increased pension application.

“The 60-day extension is available to employees who were members of EPF on September 1, 2014 and remained members of EPF on or after September 1, 2014, but missed the opportunity to apply for a higher pension before the term expires. earlier term. They can apply for the same on or before May 3, 2023,” said Maneet Pal Singh, Partner, IP Pasricha & Co.

No extension has been granted to these employees

However, those employees who retired before September 1, 2014 and opted for a higher pension under the pension scheme, paid their contributions but their application was rejected by the EPFO, must submit their application form no later than March 3, 2023. Since no extension has been provided to these employees, he added.

What happens if you opt for a higher pension with WPA?

Amit Gupta, MD, SAG Infotech said that in order to provide a larger pension after retirement, part of an EPFO ​​member’s EPF corpus will be moved to the EPS scheme from the date of joining if the person chooses the higher pension under EPS.

The employee owns the money in the EPF and in the event of death, for any reason, the nominee or legal heir is entitled to the full amount.

Your VUT scheme may be jeopardized if you opt for Higher WPA pension. “For individuals seeking early retirement, it may not be a wise idea to apply for EPFO’s higher pension, as the right to an EPS pension is only granted after 10 years of service and 58 years. The person receives a pension from the EPS based on a formula and a lump sum tax-free amount from the EPF account at the time of retirement,” said Amit Gupta.

The availability of more effective alternatives, such as the government-backed NPS that offers access to a configurable multi-asset portfolio and additional tax deductions, could act as a deterrent to savvy investors with longer time to retirement. “Furthermore, the option may not make sense for those seeking early retirement, as to be eligible to receive a pension, the person must have been employed for 10 years and have reached the age of 58,” said Nirav Karkera.

According to Sumit Sabharwal, CEO of TeamLease HRtech, opting for a higher pension means that your EPF corpus is reallocated to the EPS scheme. Doing so will reduce the lump sum payment you receive when you retire. Employees must therefore decide during their retirement days whether they want a higher lump sum payment or a higher pension. But if you want flexibility and diversity in your retirement plan, you can explore retirement options beyond EPFO.

Who should go for it?

According to Nirav Karkera, Head of Research, Fisdom, its core, the conclusion rests on two primary decisions. Firstly, EPF is your product of choice to invest for your retirement and secondly, if a higher monthly pension appeals to you more than a one-off benefit at retirement. If the answer to both is affirmative, the subscriber can further explore the opportunity offered.

How to secure your life after retirement?

There are many ways to secure your life after retirement. For example, investments in stocks can bring you dividend income and capital appreciation, real estate is a good option for rental income, debt instruments can generate interest income, etc., said Sumit Sabharwal.

You can spread your retirement savings across several baskets instead of concentrating them in a single investment vehicle, he added.

Pension fund body EPFO ​​issued circulars on 29 December 2022 and 20 February 2023 with instructions for eligible employees to apply for a higher pension under the Employee’s Pension Scheme (EPS).

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.