Provident Fund: Pension Scheme - Part 3

on Feb 19, 2013
So you came here searching for the answer for 541 Rs or 8.33% of PF which go to the Pension Scheme?
Then you should try reading this: http://www.epfindia.com/Circulars/EPS95_update102008.pdf .

Sounds too complicated? Let us simplify some part of it.

A Part of PF contribution goes to Pension fund. The Aim is to give you some money when you get retired on monthly basis, or in other words to pay you Pension.

Questions:
1. When will I get Pension:
After you reach age of 58 years or 50 Years if you are willing to get a reduced amount.

2. How much pension I can get?
Well, If you work for 35 years and when you are 58 your basic pay is more than 6500 then you can get around 3250 Rs per month. Formula for calculation is as below
Pension = (Last pensionable salary*Years of  pensionable service)/70

3. Can I withdraw the amount?
Yes and No
Yes: If you withdraw your PF before 9 year 5 months of service.
No: If you withdraw your PF after 9 year 6 month of service.

4. How much amount I will get when I withdraw?
Yrs Factor
1    1.02
2    1.99
3    2.98
4    3.99
5    5.02
6    6.07
7    7.13
8    8.22
9    9.33
On the left are your number of years service, Multiply With the factor to your basic salary to calculate your pension. Eg your Basic was 6500 and your worked for 5 years and withdraw the pension the it will be 6500*5.02 Rs.

5. What happens after you complete 10 years of service?
You get a service certificate which you can use to get pension after you attain age of 50 or 58.

6. Why can't I see the Pension fund amount after I transferred my PF account to another company?
Because the amount never gets transferred, Only the service gets transferred..! Reason being the pension calculations are done on Your Last drawn salary for 12 months and Your total service.

So the moral of story is: Start investing in Some other pension schemes which can give you a better return than the EPS. This Pension Scheme is just a eyewash by government. Why? Lets do a simple calculation. You contribute 541 Rs for 35 years in a RD and lets assume a interest of 8%, you will get amount of 1233189. Keep it in FD at 7% Interest then also you will get more amount than what government is paying(Interest rates are subjected to change).

That is all the Gyaan I can give right now. Next I will try to explain the part how to transfer and withdraw your PF account.

Please ask your queries in the comments...!! Thanks for reading. Share it if you like it... :)

There are a Few More posts by me on Provident fund You can read them at below Links.

Provident Fund Explained: Part 1

Provident Fund Checking Balance: Part 2

7 comments:

Jim Zubemo said...

Thanks. Read all 3.
Good Information.

I have been curious lately because I checked PF balance a few times and the amount is still the same.

The SMS however reads "...Accounts updated up to 31-03-2012". I am relieved a bit to know that means the balance showing is a year old.

But if I have to leave my job and choose to withdraw, what till be the amount I will be getting? The year old amount that is showing? OR a new amount that is due?

Lozil said...

Hi Jim Thanks for commenting.

If you apply for withdrawal then you will be getting the amount which is due to you.

Main problem with the PF Balance check is they never bother to update the data.

You can download the latest statement of your PF from http://members.epfoservices.in/ Just register there and generate your E-Passbook.

Gaurav Goyal said...

I tried to transfer my account, and the 541 Rs contribution has not transferred to the new account. I can see you have mentioned that it never gets transferred, but can you please explain a little more as to what happens to that amount ?
Have I lost that amount due to transfer ?

Lozil said...

Hi Gaurav, The amount is never transferred...! Only thing gets transferred is the service. So as you keep on transferring your accounts the service from your old account will get added to New account not the money. Hope that clarifies things for you.

Rakesh Singh said...

Provident funds, which allow you to cash in all your retirement savings at retirement, are to be phased out over an extended period it may possibly be up to 45 years before the last vestiges of these funds disappear.
Provident Fund Scheme

balakrishna naidu said...

HI Lozil,

That was really useful info on PPF, you have mentioned abt pension withdrawal factor of 9.33. Let's say if basic is 27000*9.33 = 251910)Should I get 251910 if I with draw before 9.5 years of service? You can leave me a comment on bala.n@hotmail.com. Because I have completed 9 years and quit my old company. Hence I would like to with draw soon based on your feedback.

balakrishna naidu said...

Also, this 251910 is apart from regular PPF contribution by employer(excluding pension )and employee?