IF there is one thing we start saving for right from our twenties, what would it be? Have you ever wondered? Yes, it could be a home, a car, a new life in a new country, and so much more. But, from the start of a career, we think about retirement. It is ironic to think about retirement when you have just begun to work, but that is just how the world works, doesn’t it? We realize what it would be like if we lost what we have now and how we would cope with it. When we aren’t working, it wouldn’t concern us, but when we do start, we all know it has to end somewhere. This is exactly the part where pension comes into play.
If you are working in an organization, then you would know so much more about the employee provident fund and employee pension scheme that you are investing in through your salary, but if you somehow over skipped that at orientation, no worries – let’s find out how the contribution towards pension will work in a provident fund.
Before we get to the bigger parts of this topic, let’s understand the bottom line of it, shall we?
What is the meaning of the Employee Provident Fund?
This is where it all starts, so it is crucial you know this before you know the others. But, if you want to know if you are contributing to the employee provident fund, then you must keep the following aspects in front of you and ask yourself these questions:
– Do you work in an organization that has over 20 employees?
– Is your salary for a month more than fifteen thousand rupees.
If you said yes to both of those questions, then you are contributing towards the employee provident fund, which is compulsory by the law, and your organization is also following it.
Employee Provident Fund Explained:
Employees’ Provident Fund is a statutory benefit available to Indian employees. Employees’ Provident Funds and Miscellaneous Provisions Act – 1952 applies across India. The Employees’ Provident Fund (EPF) is administered and managed by the Central Board of Trustees (CBT), which was founded by the Central Government and consisted of members from the government, employers, and employees.
This Board’s activities are supported by the Employees’ Provident Fund Organization (EPFO).
Employees’ Provident Fund (EPF) is a social program established to ensure that employees have a brighter future. It is a legislative benefit provided to personnel after they retire or leave the military. Employees’ dependents will be eligible for benefits if they die while on the job. Employers and employees are required to contribute to the Employees’ Provident Fund Scheme (EPF Scheme) under the scheme.
If certain circumstances are met, the interest gained on the sum is credited to the member’s Provident Fund Account (PF account) and made available to the employee at the time of retirement or exit from employment, as the case may be.
What is an Employee Pension Scheme?
The EPF wages and EPS wages can’t live without each other – let’s look at how. The Employees Pension Scheme (EPS) was established in 1995 with the primary goal of assisting employees working in the organized sector. EPS will be available to all employees who are eligible for the Employees Provident Fund (EPF) plan.
Both the employee and the employer contribute 12% of the employee’s basic salary and Dearness Allowance (DA) to the EPF. While the employee’s entire part goes to EPF, the employer’s contribution goes to EPS at a rate of 8.33%. After the employee retires, the plan provides a steady stream of income.
Also, there is one thing you cannot skip, there are various types of EPS, and we can talk about them, so you understand everything about it.
What are the Types of Employee Pension Schemes?
Here is a list of different EPS that you will definitely want to know:
- Widow Pension
- Orphan Pension
- Reduced Pension
- Child Pension
What are the Main Characteristics of EPS?
Here is your answer to how pension contributions will work in your provident fund:
1. Employees who earn a base salary plus DA of Rs.15,000 or less are required to enroll in the scheme.
2. Once you reach the age of 50, you will be entitled to withdraw your EPS. However, the money you receive will be at a lower interest rate.
3. Since EPS is backed by the Indian government, the returns are guaranteed, and investing in the scheme carries no risk. The amount that will be refunded will be set in stone and will not be altered.
4. If the child is physically challenged, the pension amount will be paid to them until he or she dies.
5. If the widower/widow remarries, the children will be classified as orphans and would receive the additional pension amount.
6. Employees who participate in the EPF plan will be automatically registered in the EPS plan.
7. If the widow or widower is receiving an EPS payment, they will continue to receive it until he or she dies. After that, until they reach the age of 25, the children will get the pension amount.
8. The individual will earn a monthly pension of Rs.1,000 at the very least.
Investing or saving up for retirement is something all of us need to start off early; the earlier you start, the smaller you can start. That is exactly how EPS also works for you, it could seem small, but it would play a big-time benefit to your pensioned future.
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