hi, I am G C , I am working in a PSU BHEL since Mar 2010.Birth Month is May 1987.Having a daughter of 8 yrs old. Not much ancestral property. Current Basic+DA is 65000.Company contribution in PF is 8L approx. Only NPS of 50000 annual is investing since 7 yrs for pension.As still 24 years is there for retirement, considering future instability with Govt scheme & health, should I go for higher pension EPS-95 or stick with EPF only

Ans: Sorry. I do not have any expertise on this particular subject and I would not be able to answer your question in any comprehensive manner.

However, I did some googling and found these two articles useful. Hope they answer your question to some extent:-

https://economictimes.indiatimes.com/news/et-explains/explained-how-much-your-eps-pension-will-rise-how-to-get-that-all-details-here/articleshow/68716373.cms?from=mdr

https://economictimes.indiatimes.com/wealth/invest/factors-you-should-consider-before-opting-for-higher-pension-under-eps-scheme/articleshow/68750384.cms

Ans: Evaluating Pension on Higher Wages vs. Alternative Investments
Understanding Your Pension on Higher Wages
First, congratulations on your upcoming retirement! Opting for "Pension on higher wages" with EPFO means you will receive a monthly pension of about Rs. 32,000. This amount will be a steady source of income. However, you need to pay Rs. 11 lacs in arrears to the pension fund. After your death, your spouse will receive half the pension, and there will be no return of the Rs. 11 lacs.

Assessing the Risks and Benefits
Pros:

Steady Income: You receive a guaranteed monthly pension, which provides financial stability.
No Market Risk: Your pension amount is not affected by market fluctuations.
Spousal Benefit: After your death, your spouse will receive half the pension, ensuring some continued support.
Cons:

Arrears Payment: You need to pay Rs. 11 lacs upfront, which is a significant amount.
Limited Return: After both you and your spouse pass away, the Rs. 11 lacs is not returned.
Inflation Risk: The pension amount is fixed, and inflation might reduce its purchasing power over time.
Exploring Alternative Investment Options
Investing Rs. 11 lacs elsewhere could potentially offer higher returns. Here are some alternatives:

Mutual Funds:

Actively Managed Funds: These funds have professional fund managers who actively make investment decisions. They can potentially outperform the market, offering higher returns.
Regular Plans via MFDs: Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential can provide personalized advice and better fund management.
Fixed Deposits:

Low Risk: Fixed deposits are a safe investment option with guaranteed returns.
Flexibility: You can choose the tenure and amount of investment based on your needs.
Government Bonds:

Stable Returns: Government bonds offer stable and secure returns.
Interest Income: Bonds provide regular interest income, which can be a source of steady cash flow.
Comparative Analysis
When comparing the EPFO pension with alternative investments, consider these factors:

Risk Tolerance: EPFO pension offers low risk, while mutual funds can be volatile but potentially more rewarding.
Income Stability: EPFO pension provides a fixed monthly income, while investment returns can fluctuate.
Inflation Protection: Investments like mutual funds can potentially keep pace with inflation, unlike a fixed pension.
Personalized Strategy
Given your specific needs and risk tolerance, it might be beneficial to diversify your investments. Here are some suggestions:

Combination Approach: Consider allocating a portion of the Rs. 11 lacs to the EPFO pension and the rest to mutual funds and fixed deposits.
Professional Guidance: Seek advice from a Certified Financial Planner (CFP) to tailor a plan that aligns with your financial goals and retirement needs.
Empathy and Understanding
Your situation is unique, and it’s crucial to find a balance that offers security and growth. By exploring different options and understanding the pros and cons, you can make an informed decision. Remember, your financial well-being in retirement is paramount, and taking the time to plan carefully will pay off in the long run.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have a well-structured investment approach with a mix of equity and debt investments suitable for your age and goals.

Equity Allocation: Your SIPs in diversified equity funds and NPS contributions provide a good base for long-term growth. Given your 5-18 year horizon, it aligns with your goals.
Debt Allocation: EPF + VPF and PPF form a substantial part of your debt portfolio, providing stability and tax benefits.
Emergency Fund: With EPF, VPF, and PPF, you have a decent debt cushion.
Retirement: Your agricultural income and EPF contributions will support your retirement income.
Suggestions:

Review & Rebalance: Periodically review your portfolio to ensure it aligns with your goals and risk tolerance. Consider rebalancing if needed.
Tax Planning: Given the EPF, VPF, and PPF contributions, ensure you're maximizing tax benefits across investments.
Insurance: Since you have insurance coverage from both work and personal policies, review if the coverage amount is adequate considering future needs and inflation.
Continued Investments: Continue with your SIPs and NPS contributions to benefit from compounding and rupee cost averaging.