Option for reduction of EPF contribution - Dangerous
Seen in newspapers, HR circles that an option will be provided to employee to reduce his contribution, but Employer share will remain same. Why this? It is claimed more take home compensation for employee, consequently increases his purchasing power! Funny!! at the same time it is dangerous too. it cannot be denied that EPF is a social welfare legislation to provide help /rescue to employees post retirement by way of Lumpsum amount of what he contributed with interest and pension though meager.
It seems Govt. is interested to reduce its interest burden on EPF contribution amount while retaining employers' as it will not have interest burden except to 3.67%. The increase in purchase power with this saving etc., are not worthy saying, while you are killing saving habit of people by reduction in returns on savings and unsecured future of deposits without insurance guarantee.
Requesting local circles to oppose this move, as it is detrimental to employees' post retiral life as we do not have any social net work protection after retirement. more
It may be useful to refer to the basic idea and logic of fixing percentage and employer contribution. If option is given the idea of secure old age may at risk. Basically they are compulsory contributions. more
"an option will be provided to employee to reduce his contribution" - If it is an option; those who wants to save money can go for it. Govt is making is optional only. Those who wants to save more are welcome to do so. What's wrong in it? more
It will definitely effect old age requirement/spending/pension. more
Jumping into any conclusion of good or bad is equally dangerous.
We need to carefully calculate income both ways and decide. Also the type and time of requirement is equally important. You will certainly not continue with a high interest loan EMI and wait for pension.
EPS can't always be attractive and EPFO tactfully calculate the pension.
Though website/blogs says pension is calculated as per last 5 years average that's completely wrong. It is calculated separately upto 2014 (max 6500) and after 2014 (max 15000)- mind it as happened/clarified to me by EPFO.
Also one should know the reduction in pension after death which is unchanged once you invest in other scheme. That's the WORST in EPS and calculating only pension amount as forever interest is wrong. more
Look at the other picture, govt. provides various options to withdraw money prematurely, ask the stastics 90% of the people Avail this, many of them leave the job just because they have to clear a hand loan of twenty or thirty thousand , so if the govt. wants citizen to save at 24 % till 60 years then no premature withdrawals should be allowed or collect 7 % from employer and 1.31 % from employee and give 50 % of the last drawn salary as pension. more