Any views on the new pension opt-in via the EPF?

[CC_Fire]

As some of you may be aware, the supreme court in a ruling has ruled that EPFO subscribers prior to sept-2014 now have the option to opt of increased pension without limit under the EPS by foregoing 8.33% of their salary without cap since their contributions began

Any views on this?

 

[gurbina]

The irony: OCI/Foreigners have no max contribution limit. If they earn 2L they'll be contributing 48k per month jointly with the employer contribution.

 

[thanix]

As some of you may be aware, the supreme court in a ruling has ruled that EPFO subscribers prior to sept-2014 now have the option to opt of increased pension without limit under the EPS by foregoing 8.33% of their salary without cap since their contributions began

Any views on this?

Depends on personal preference. If you want lump sum at retirement and manage your retirement life, just current scheme is ok. If you want better pension life long, you can opt for this.

Couple of points for one who is closer to retirement 50+ age

1. Taxation: Current EPF lump sum withdrawal at retirement is fully tax free without any obligation except the small EPS portion which will be given as meagre pension.

However if you opt for higher pension, at current rate it becomes taxable beyond 7L which is 60K per month. So work out calculation accordingly. I am not sure commutation option is available in EPS.

2. Life expectancy: if one can anticipate to live long, this pension is a good option. But if one happens to pass away soon after retirement, spouse gets only 50% as family pension and no monetary benefit for kids.

In the old one, the lump sum can be used by kids. So just decide based on optimistic vs pessimistic view about life expectancy.

In my opinion, for people less than 50 years of age this may not be a great choice given the changes in our governance rapidly but the comfort feeling that each month a fixed pension is coming is unparalleled. If your spouse is working, please discuss and decide whether one of you can opt and other one don't have to opt, if available.

 

[CC_Fire]

I broadly agree and am leaning towards remaining with a lower pension/higher corpus especially because the implied annuity rates look quite high and therefore feel that the scheme will undergo many changes (most adversely) over the coming decades. Since the EPS will not have adequately funded to provide the high level of pensions. The government will need to fund it !! That usually means middle/upper-middle will get some tax hits or some caps will be introduced to keep majority people happy