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Sunday, 3 July 2016

Employees’ Pension Scheme (EPS): Increase Your Pension with Deferred Withdrawal


Government recently made few amendments to the Employees’ Pension Scheme (EPS). These amendments are aimed at reducing the deficit in Pension Fund and provide Subscribers with an option to receive higher pension. The new changes allow Subscribers to defer withdrawal of pension for 1 year or 2 years after reaching the age of 58 but not beyond 60 years.
Member will enjoy an additional increase of 4% in case of deferral for 1 year and 8.16% in case of deferral for 2 years. Members will also have the option to contribute to the Pension Fund till the age of 60 which would be included while calculating pensionable service and contribution period. Members who do not wish to contribute during the deferral period will also receive the hike on actual pension (pension due after 58 years). However, this additional period will not be considered for determining eligibility.
This notification is effective from 25th April 2016. 


Eligibility for Deferral Pension

Any Member, who has rendered eligible service of 10 years or more and retires at the age of 58 years.
Any member who has crossed the age of 58, 59 or 60 years before the publication of notification but has submitted the withdrawal claim after 25/04/2016 may also avail the option.
Member who attains 58 years of age and has eligible service of 10 years after 25/04/2016 will have the option to contribute to the Fund till the age of 60.

Impact of Deferment of Pension

Now, Members may start receiving the pension from 58, 59 or 60 years of age as per their choice.
Members will receive 4% increase in actual pension payable for lifetime if they chose to receive the pension on completion of 59 years instead of 58. Similarly, if one chooses to receive pension at the age of 60, he/she will receive a hike of 8.16% on actual pension for entire life.
This implies if an Individual is entitled to get pension of Rs 2,000 at the end of 58 years, will now receive pension of Rs 2,080/- on withdrawal deferral of 1 year and Rs 2,163/- if the deferral is for 2 years.

Pension without Contribution for Deferment Period

Pension for the deferment period will be calculated with a hike of 8.16% on the actual pension amount.

Pension with Contribution for Deferment Period

Pension for the deferment period will be calculated after including the additional contribution in pensionable salary and pensionable service. 

Death of Member After Option Date

Pension amount will be provided with deferred benefits to the nominee.

Death of Member Before Option Date

Pension amount will be calculated along with deferred benefits as per the existing provisions for the same.

Pension Calculation: With and Without Contribution

An Individual retires at the age of 60, after contributing to the fund for 23 years. He earns a Salary of Rs 15,000 (Basic plus DA) at the time of superannuation.

Pension: Without Contribution for Deferment Period of 2 years
Pensionable Salary x *Contribution Period/70
15,000x25/70= Rs 5357/-
After Increase: 5357x108.16/100= Rs 5794/-

Individual did not contribute to the fund after the age of 58 years.

Pension: With Contribution for Deferment Period of 2 years
Pensionable Salary x *Contribution Period/70
15,000x27/70= Rs 5785/-
After Increase: 5785x108.16/100= Rs 6257/-

So, Deferral with contribution will fetch Rs 463/- more on monthly basis.

*Contribution above 20 years earns additional weightage of 2 years.


Form Required for the Purpose


Application may be made through Form 10D. 

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