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EPFO Pension Calculator: To have a comfortable life after retirement, investment planning should be started from today itself. Through investment, we all want to raise a good amount for our retirement so that we do not have to face financial crisis at that time. In such a situation, EPF (Employees Provident Fund) is an excellent option for you. It is not only safe but also gives you good returns.
No matter how low your salary is, you can create a strong retirement fund through EPF. You can create a big retirement fund for yourself even with a basic salary of Rs 10,000.
Guaranteed Return on EPFO Investments
Although there are many investment and retirement plans available in the market, no plan can compete with the facilities offered by EPFO (Employees' Provident Fund Organization) on Provident Fund. Because EPFO's interest rates are not only better than other savings schemes, but EPFO also gives guaranteed returns year after year, which can help you accumulate a good amount for retirement.
Although there are many market-linked schemes that may offer higher returns than EPF, they also carry a lot of uncertainties associated with them and cannot guarantee a large sum of money by the time you retire.
How does the EPFO scheme work for employees?
Under the EPFO scheme, the company deducts 12 per cent from the employee's basic salary every month and the company also contributes the same amount. Out of the company's contribution, 8.33 per cent goes to the employee's pension scheme, while 3.67 per cent goes to the employee's provident fund.
Who can avail the benefits of EPF?
To avail EPF, you need to fulfil certain eligibility criteria. Formal sector organisations with 20 or more employees are required to register with the EPFO. However, organisations with less than 20 employees can voluntarily register with the EPFO. All salaried employees are eligible for EPF. Notably, employees earning less than Rs 15,000 per month are required to register for the EPF scheme, while those earning more than Rs 15,000 can opt for the EPF scheme on a voluntary basis.
When can you claim EPF?
The employee can use the accumulated EPF funds at the time of his retirement or leaving the job, provided he fulfils the required criteria. In case of death of the employee, the dependents get the benefit of EPF.
Let us know how a retirement fund of Rs 2 crore can be created from a basic salary of Rs 10,000.
Suppose an employee is 23 years old and his basic salary is Rs 10,000 out of his total salary of Rs 40,000. The current interest rate of EPF is 8.25%. The employee is expected to increase his salary by 10% every year till the age of 60 i.e. till retirement. So in this sense, how much will the employee contribute to EPFO in the next 37 years?
According to EPFO rules, the employee contributes 12% of his basic salary i.e. Rs 1,200 every month. The company also contributes the same amount. Out of the company's contribution of Rs 1,200, Rs 367 will be added to the employee's EPF fund. In this way, the total monthly contribution to the EPF fund will be Rs 1,567 and this amount will increase by 10% every year. Apart from this, out of the company's contribution, Rs 833 goes to the Employee's Pension Scheme (EPS).
Age of the employee: 23 years
Years of service: 37 years (till retirement at age 60)
Total monthly contribution: Rs 1,200 (by employee) + Rs 367 (by company) = Rs 1,567
Annual salary increment: 10%
According to this, the total deposited amount in 37 years will be Rs 68,46,018.
The total interest received on this amount will be Rs 1,30,08,857.
The total corpus or maturity amount after 37 years will be Rs 1,98,54,875.