Can I opt for higher EPS pension? I retire in 2046

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: February 28, 2023 at 6:00 am

A reader tweeted, “I am working in one of the best PSU of India, current Basic+ DA is 125k with 8% increment/ yr. Natural retirement year is 2046. To choose EPS, i have to deposit 12 lakhs from my PF. Is it good to join EPS?”

First, the good news. Subscribers now have  up to May 3rd 2023, to decide if they wish to opt for higher EPS pension. Now there are different categories to consider. (1) Those who retired before Sep 2014, (2) Those who retired after Sep 2014, (3) Those who are going to retire in the recent future (or recent past and (4) those who are going to retire in future (10Y or more) – assuming all categories are eligible for higher EPS pension.

We will discuss the first three categories in a future articles and tackle the easy one – (4) here.

  1. Rs. 12 lakhs removed from the EPF account (assuming the calculations are correct) is a huge dent even today. It is a massive dent considering the impact of compounding over the next 23 years.
    • Note: To be eligible for EPS, a subscriber who will retire should be contributing more at 12% of basic pay + DA. If the reader has not been making such higher contribution, then she is not eligible for higher EPS pension. The Rs. 12 lakhs mentioned above is assumed to be the shortfall to reach the 12% of basic + DA limit on past contributions.
  2. That is not all. Future contributions to EPF will also decrease, further decreasing the total corpus.
  3. Not opting for EPS pension has multiple benefits for those in category four. They have complete control of their retirement corpus and plan it as they like. Most importantly, only those in this category have the time to set right past investing mistakes (if any) and go about it right in future. We strongly recommend working with a SEBI registered fee-only advisor from our curated list.
  4. After retirement a part of the income can be used to buy an annuity using RBI bonds or insurers. See: How I used RBI Retail Direct to buy govt. bonds and create an income source.
  5. Unlike EPS pension, a RBI bond can be held in joint mode, and such an income will not drop to 50% on the death of the subscriber. The entire capital remains ours and can be handed down to our nominees.
  6. EPFO can change EPS pension rules at any time in future, and if these are unfavourable, the money already given to EPS is lost forever. This is a big risk for those in category four.
  7. A salary cut in the future would lead to lower EPS pension. This is unlikley for those in a PSU but a possibility for those in corporate sector – layoffs, job hopping etc.

Therefore we believe that those who retirement is at least ten or more years away should not opt for higher EPS pension. They should take professional help and sort out their retirement planning.

This dopes not imply that those in the first three categories should opt for EPS pension. We will consider these situations in a future article.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!




    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
    Do share this article with your friends using the buttons below.
    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!




      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)