Labor Ministry Higher Pension: Pension Scheme is in headlines for the last six months. After the decision of the Supreme Court regarding the facility of more pension in November last year, it is being discussed continuously.
Employees’ Provident Fund Organization (EPFO) has once again extended the deadline for the option of getting more pension under the Employees’ Pension Scheme (EPS). Amidst all this, the question that is troubling people the most is how will the calculation of higher pension be done… The Labor Ministry has now shared its formula with the people.
Clarification of Ministry of Labor
The Labor Ministry on Wednesday made it clear that it will use an additional 1.16 per cent contribution from the employer’s total contribution of 12 per cent to the PF to calculate the higher pension. This will be in line with the Supreme Court’s decision of 4 November 2022. Along with this, the Ministry of Labor has also told that this step to reduce the burden on the subscribers of the Employees Pension Scheme will be retrospective, that is, this decision will not be applicable from the day of arrival but from the back.
Money will go to pension fund from here
The ministry said in its statement that along with the Employees’ Provident Fund and Other Provisions Act, it has been told in the Social Security Code that contribution cannot be taken from the employees for the pension fund. Keeping this in mind, it has been decided that an additional 1.16 per cent will be taken from the 12 per cent contribution of the employers towards the Pension Fund, which is going to the Provident Fund.
There will be no burden on the employees
Let us tell you that in EPS the employee does not make any contribution on his behalf. Out of the total 12 per cent contribution made by the company, only 8.33 per cent goes to EPS. Whatever amount is more than this in the contribution of the company, it goes to EPF. The Ministry of Labor has clarified that the increased contribution to EPS will also go from the company’s share, which means that there will be no impact on take home salary or in hand salary even if you opt for higher pension.
There will be loss
Although it also has its disadvantages. If you choose a higher pension option, then the amount deposited in PF by the company will be less, which will affect your PF fund. Employees get the benefit of compound interest in PF. Now since part of PF will go to EPS, the benefit of compounding will also reduce. Similarly, the lump sum amount that is received from PF on retirement or already leaving the job, this amount will also be affected if the option of higher pension is selected.
Deadline extended till this date
The deadline for opting for higher pension was ending on 03 May. EPFO has increased this and now interested subscribers can opt for higher pension till 26 June 2023. Its deadline has been extended for the second time. First of all, in an order given on 4 November 2022, the Supreme Court had fixed the deadline till 3 March in this regard. EPFO had then extended the deadline till May 3 to opt for higher pension. Now it has been pushed further.
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