How recent EPS 1995 amendment by Employee Provident Fund Organisation benefit pensioners - Explained
Pensioners enrolled in the Employee Pension Scheme (EPS) 1995 have more reasons to rejoice
Pensioners enrolled in the Employee Pension Scheme (EPS) 1995 have more reasons to rejoice. The Central Board of Trustees (CBT) of the Employee Provident Fund (EPF) has now cleared a decision that will provide pensioners freedom to decide on how they want to encash their pension money. This decision is set to benefit over six lakh pensioners. Earlier, EPS subscribers could opt for a lump sum (which is a commuted portion of the pension money) and the remaining amount was paid as monthly pension. When a pensioner opted for a lump sum, his/her monthly pension amount was reduced and it was lower than the amount of pension without commutation.
What CBT decided
The CBT has approved a proposal for the restoration of commuted value of the pension to pensioners after 15 years of drawing commutation under the EPS 1995 scheme.
"In a major decision, the Central Board of Trustees (CBT) EPF in a meeting held at Hyderabad on 21 August 2019, approved the proposal to recommend for amendment in Employees' Pension Scheme (EPS) 1995 for restoration of commuted value of pension to the Pensioners after 15 years of drawing commutation which will benefit approx. 6.3 lakhs pensioners. This was a long pending demand of the pensioners," Ministry of Labour and Employment said in a statement Thursday.
How CBT decision affects pensioners
Now, if you will opt for commutation of pension, you will get a portion as a lump sum and your pension will begin on the rest of the amount. After 15 years, the original amount of pension, which you would have got without commutation, would be restored. With this new decision, the employee would have the freedom to decide on how to use his/her pension money. One can opt for commutation and invest the lump sum in other instruments, or use it for personal use. Or, continue enjoying higher pension without commutation.
What is commutation of pension?
Commutation of pension basically means paying out a lump sum to an employee from his/her earned pension. If one opts for commutation after retirement, he/she gets monthly pension on the amount remaining after commutation. Naturally, this reduces the monthly pension amount.
Under commutation, the lump sum is paid to the employee from his/her earned pension on its present-day value.
How to calculate pension
You can calculate pension on the government of India's official pensioners' portal - https://pensionersportal.gov.in/PensionCalculators/Calculator.asp