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Are you one of those crores of subscribers who are presently contemplating the Higher EPS contribution for Higher pension vs the existing EPS contribution and higher EPF money on retirement? 

Well, if you are a part of that list this email here might be able to help you take an informed decision on this whole debate.

Well for those who do not know this debate, Supreme court has last year ruled that the Pension for EPS contributors can be fixed as per the actual basic of the employee instead of the present cap of Rs 15000 as Basic + DA as per the Act. This essentially meant that irrespective of your last drawn salary your pension was limited to an amount of Rs 7500/ per month under the EPS Scheme. 

Now there are a few advantages of this new scheme namely
1. The pension will be much higher then the Rs 7500 pension 
2. The pension will be for lifetime of employee and then 50% pension for spouse till his/her lifetime and then 25% of the pension for kids till they attain the age of 25.
3. Higher pension will help retain the standard of living very close to pre retirement levels as pension will be almost half of average salary of last 5 years

Drawbacks of this will be
1. The EPF money will get reduced.
2. Even the EPF money received earlier will have to be transferred to EPS scheme
3. The lumpsum received on retirement from EPF will go down drastically
4. In case of early death of retired employee and spouse, assuming the kids are older than 25 as will be the case for most, the residual amount in EPS scheme is not paid to the next of kin and stays with the fund.

The Best way to look at this is to look at the calculations of both these scenarios, We at brightwealthideas have prepared an excel file capable of customisation to your needs. The file will give out an approximate figure of your funds in both scenarios, and help you take a more informed decision. The calculations are going to be based on certain assumptions, including but no limited to Increase in Basic + DA every year, EPF returns being at a constant rate, overall 35 years of service/ contribution to EPF/ EPS scheme, no withdrawals from EPF balance, A fixed rate of return even after retirement. The retirement corpus getting invested for regular cash flows, and the principal being planned for legacy/ next generations.....

A lot of these variables can be changed and you can input the figures that are your actual figures to get an idea of how this fund will operate for you. 

While a blog page cannot share the excel calculations as they are dynamic and person specific. So to know what is the right option for you, you will need to calculate using the Excel file. The excel file can be shared with you over email and whats app but for that you would have to send out a request with subject line "EPS and EPF Excel". Once we receive an email or Whats app request my office will share the file with you.
 

Looking forward to connecting with you on this. 

You may also connect with us for all your financial planning and investment needs, Explore the calculators on our site to plan for a financial stress free life.


Raghupreet Singh Kanwar
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