Courtesy: ET Online (www.economictimes.indiatimes.com/personal-finance) Matter is fully copy and pasted from the link for the future help of blogger himself and his valued readers and visitors. No other intentions are involved in respect of copy-paste of the following article:
His employers have put in nearly Rs 85,000 in a scheme on his behalf but Prashant Jangale does not know how, when or what he will get in return. The Mumbai-based marketing professional's employers have contributed Rs 541 per month to the Employees' Pension Scheme (EPS) since 2001. Till ET Wealth told him about this benefit last week, Jangale was clueless that he and his homemaker wife are eligible for monthly pension for life after he turns 58.
He is not alone. Almost 59% of the respondents to an online survey conducted last week by economictimes. com were unaware that private-sector employees covered by the Employees' Provident Fund are also eligible for lifelong pension (see survey). More than 30% of these respondents have contributed between Rs 65,000 and Rs 1 lakh to the EPS till now.
The amount flowing into the EPS every month is so small that most don't even notice the deduction. It is 8.33% of the employer's contribution to the EPF on behalf of the employee, with a cap of Rs 6,500 a year. Even so, the monthly contribution of Rs 541 has the potential to amass a huge sum over the long term. Even at a modest interest rate of 8%, this tiny amount can burgeon into Rs 12.41 lakh in 35 years.
Sadly, this is not what happens to your contribution to the scheme. The amount just flows into a pension pool without earning any interest for you. If you have completed at least 10 years of service, you start getting pension from this pool after you turn 58. The pension amount is based on the number of years you had contributed to the scheme and your basic pay at the time of retirement. Here again there is a cap of Rs 6,500. If you were in service for 20 years or more, you get 2 bonus years as well.
His employers have put in nearly Rs 85,000 in a scheme on his behalf but Prashant Jangale does not know how, when or what he will get in return. The Mumbai-based marketing professional's employers have contributed Rs 541 per month to the Employees' Pension Scheme (EPS) since 2001. Till ET Wealth told him about this benefit last week, Jangale was clueless that he and his homemaker wife are eligible for monthly pension for life after he turns 58.
He is not alone. Almost 59% of the respondents to an online survey conducted last week by economictimes. com were unaware that private-sector employees covered by the Employees' Provident Fund are also eligible for lifelong pension (see survey). More than 30% of these respondents have contributed between Rs 65,000 and Rs 1 lakh to the EPS till now.
The amount flowing into the EPS every month is so small that most don't even notice the deduction. It is 8.33% of the employer's contribution to the EPF on behalf of the employee, with a cap of Rs 6,500 a year. Even so, the monthly contribution of Rs 541 has the potential to amass a huge sum over the long term. Even at a modest interest rate of 8%, this tiny amount can burgeon into Rs 12.41 lakh in 35 years.
Sadly, this is not what happens to your contribution to the scheme. The amount just flows into a pension pool without earning any interest for you. If you have completed at least 10 years of service, you start getting pension from this pool after you turn 58. The pension amount is based on the number of years you had contributed to the scheme and your basic pay at the time of retirement. Here again there is a cap of Rs 6,500. If you were in service for 20 years or more, you get 2 bonus years as well.
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