Does opting for Employee pension scheme(EPS) means losing CPF contribution from employer?

[godsjules]

My father works in a PSU and really confused whether to take EPS by paying a additon amount.There is a lot of confusing between his colleague- most of them believe that if they opt for EPS they will also lose the CPF contribution from the employer.

The EPS doc where one will get 23k pension by paying an additional amout(7.7L):

https://imgur.com/a/5sKoHsF

For eg:- If CPF is 10L and employer contribution is 10L. So total CPF is 20LThere is scepticism if one opts for EPS then they will not give the 10L from CPF and will only receive 10L while withdrawing CPF

This is the form one has to fill if one chooses to avail EPS:

https://imgur.com/a/C9JLGlW

Can someone please clarify this situation

 

[keepitsimple144]

@godsjules What used to happen

employer' PF contribution gets split into two parts

Part1 8.33% of CPF goes to EPS

Part2 3.67% of CPF goes to PF account

Caveat is if 8.33% of CPF is greater than 1250/- then only 1250 goes to EPS and the delta goes into PF account.

This would mean one gets a higher PF at the time of retirement but pension is very less.

What changed

They have removed the capping of 1250/- pm on pension account, therefore one can divert more fund of his CPF to pension account instead of PF account.

They are allowing us to do this back dated as well, so funds that were directed from CPF to PF account, along with interests will have to be moved towards pension account if one opts to do so

I don't know the exact calculation, your dad' HR or Personnel department should be able to help

 

[vigilant4christ379]

@keepitsimple144 If you move companies and have your pf transferred to the new account, what happens to the accumulated eps? Do you loose it all?

 

[godsjules]

@vigilant4christ379 No

 

[vigilant4christ379]

@godsjules Where does it go then?

 

[flaunge]

@godsjules Yeah there's a lot of confusion in the air .. This video was quite helpful in understanding the basic concepts for me.

Ps: My sister is a teacher and has about ~20 years before retirement, so we are going with higher pension. As we felt that monthly payout for life > one big lumpsum.

 

[kt71]

@godsjules Talk with the company HR they should provide much more specific advice than the people here. I'm in a PSU as well and while this whole thing isn't applicable to me the conversation is between employees and HR to sort through the confusion.

 

[christy4vr]

@godsjules It's totally subjective. You have to work with numbers. The recent SC judgment allows to opt for pension on full pay (basic + DA). In short you have two option:

1. Get a higher lumpsump amount (CPF) + low monthly pension.
2. Higher monthly pension + relatively lower lumpsump amount

If you have already planned your retirement well and don't need to depend on pension only, you can go with option 1.

Hope this helps. Ping me if further clarification required.

 

[godsjules]

@christy4vr It will be really great if we can opt for higher pension without losing the cpf contribution, as we will already be paying 7.7L more for that

 

[flaunge]

@godsjules Your CPF account will continue, but your employer will be contributing only 3.67% to it from now onwards..

The 7.7 Lakh would be removed from your CPF balance. Wherein, the principal amount of 4.6L would be transferred to your EPS, while the interest will be taken away (As EPS doen't provide any interest)

[sup]^[/sup] The above is done to equate your account to where it would have been if you would have opted for higher-pension right from the start of the career.

 

[godsjules]

@flaunge My father is retiring soon and does that means after retirement he will get his complete cpf ie 20L-7L = 13L (20L is example)
In short also getting the employer contribution as well

 

[flaunge]

@godsjules So in the example you stated in original post ..

"If CPF is 10L and employer contribution is 10L"

The employee contribution will be untouched so 10L

In the employer contribution of 10L, 7.7 will be taken back .. so you will have 2.3L remaining there.

So if you dad retires today he would get 12.3L total instead of 20L

However the gains of that is instead of 3300 rupees pension, he will instead be getting 23k for life .. and god forbid something happens .. then your mom will get 11.5k for life .. and god forbid something happens .. then you will get 5k till you are 20 years old.

Essentially for 7L, which will last only few years, you are getting a continuous source of income which can continue for years to come.

As i posted in a different comment .. check out this video .. it will clear your fundas and give you confidence of doing the calculation yourself.

 

[godsjules]

@flaunge This was really helpful

 

[lwoods]

@godsjules Offtopic: who approves posts in this subreddit?

I don't see any of my posts being approved. Is this subreddit dead?

https://www.reddit.com/r/IndiaInvestments/comments/1175lqu

 

[aninjainalabcoat]

@godsjules Why my posts are getting deleted ?

Is there a place for rules ?

 

[pharbach]

@godsjules I am not sure if this is the exact similar situation, but I think what happened is earlier in 2000-2005s you had option to either opt in/out of this bank/PSU pension scheme, and because the Interest rate were high your father might have decided toopted out. Now after some negotiation and all( because interest rate are now very low) they are giving you an option to opt back in and give this difference (+ interest)you had to pay all those year if you had decided to stay.

 

[godsjules]

@pharbach No that’s not the case, my father has been contributed to cpf since last 26 years. We never opted out

 

[pharbach]

@godsjules Ok then ans these questions
1. Home many more years till you father retire.

1. Apart from 7.7L how much more EPF to EPS is getting transferred if any?

 

[godsjules]

@pharbach retiring by the end of 2023,

extra 7.7L is getting transferred from CPF to EPS to adjust to higher pension scheme

 

[pharbach]

@godsjules Boss then it's a no brainer, just apply asap. No 15L is gong to give you a monthly interest even if you let go principal.