Indeed, this is a very big announcement from the Employees’ Provident Fund Organization (EPFO) which will affect millions of EPF accounts. With the new provisions, now employees may have a chance to convert their entire PF balance into a monthly pension, thus securing lifelong retirement benefits.
This will surely prove higher pension benefits for those employees who will be contributors to the scheme for a long time. Let us understand the whole thing regarding this major change and its possible outcomes.
How Shall The EPF Pension Increase Happen?
Every EPF member, at present, gets a full and final settlement at the time of retirement in the form of his PF contributions plus the interest accumulated on the balance over the years. Meanwhile, that part of the contribution by his employer goes into the EPS (Employees’ Pension Scheme) from which he is entitled to a somewhat limited monthly pension.
The last update will allow EPFO members to convert their entire PF balance into a pension fund resulting in a possible increase in their monthly payouts. Let’s observe how:
- No one-time PF withdrawal upon retirement’
- Instead, a lifetime pension based on the total accumulated funds’
- Amount will be calculated based on total balance and service tenure.
Who Is The Beneficiary Of This Rule?
This is beneficial to a new retiree who is looking for a regular source of income instead of a single bulk disbursement.
- Also good for employees who spend long service as they will have bulky accumulated funds.
- Elderly people who want financial security and do not want the hassle of managing a lump sum amount will find it to their benefit.
Advantages Of Converting PF into Pension
- Higher Monthly Pension- Employees can have a regular pension instead of withdrawing all funds together.
- Financial Security in Old Age- Certainty of a pension provides financial stability after retirement.
- No Risk of Spending Lump Sum – Retirees will not have to apprehend managing a huge amount or its consumption.
- Pension is Forever- Regular income until death is assured, as opposed to a one-time withdrawal from the PF.
Possible Drawbacks
- Not suitable for those employees who prefer to take a lump sum as withdrawal for investments or personal use.
- The exact method of pension calculation is still awaited, yet to be finalized by EPFO.
Conclusion
The EPF pension increase is going to be a great catalyst for the employee who is seeking security for the long run in terms of finance. By allowing a full conversion of the PF balance into pension funds, EPFO guarantees that retirees will receive a regular income throughout their lives. But employees better analyze their financial position before taking up the scheme.
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