If you are heading for retirement in the next 2 years and have contributed to Employees’ Provident Fund (EPF) for atleast 20 years, here’s a reason to smile.

Retirees are likely to receive a one time reward of upto Rs 50,000 as loyalty-cum-life benefit.

Employees’ Provident Fund Organisation (EPFO) has made some important announcements recently. Speaking to media on the condition of anonymity, a senior EPFO official familiar with the development said, "The CBT has recommended amending the Employees' Deposit Linked Insurance Scheme (EDLI) to provide for minimum benefit of Rs 2.5 lakh and loyalty-cum-life benefit of up to Rs 50,000.” At present, there’s no provision of minimum death benefits although the maximum benefits are capped at Rs 6 lakh.

"The suggested benefits will be available to members after government approval. Initially, these will be provided for two years on a pilot basis and will be reviewed thereafter”, he added further.

You might be wondering why EPFO is making such generous announcements. The reason is, EDLI has a huge unutilised corpus of Rs 18,119 crore excluding the interest accrued on it.

However, every retiree won’t be paid the loyalty-cum-life benefit of a flat amount of Rs 50,000...

• Those who draw an average basic wage of upto Rs 5,000 will get a benefit of Rs 30,000.
   
• Those who earn in the range of Rs 5,001 - Rs 10,000, will be eligible for Rs 4,000 as the loyalty-cum-life benefit.
   
• And if you earn basic wages over Rs 10,000, you will get loyalty-cum-life benefit worth Rs 50,000.
  
  

Also, only those retiring at the age of 58 - 60 will be entitled for this benefit. This means, if you opt for voluntary retirement even after contributing for more than 20-years to EPF, you may not receive loyalty-cum-life benefits.

PersonalFN is of the view that, while it’s a good initiative to effectively use the corpus lying idle with EPFO; it is unlikely to add any significant value to the employees’ welfare.

Moreover, PersonalFN opines, the insurance benefits of Rs 6 lakh would be insufficient to cover for the economic loss to the family of a deceased person in most cases.

You should treat these benefits only as value-adds on your path to wealth creation and shouldn’t rely entirely on them. Rather, you should make sure you’re indemnifying risk to life by opting for a pure term insurance plan. To determine your insurance needs, try the Human Life Value (HLV) approach and to accumulate an adequate retirement corpus, invest regularly after determining how much corpus you would need at the time of retirement. Also opt for personalised financial plan to meet your financial goals as per your risk appetite.

A comprehensive financial plan takes a holistic view of your personal finances. It focuses on insurance planning, investment planning, tax planning and retirement, and estate planning.

In case you don’t have time or skills to do all these jobs on your own, you might think of hiring an unbiased Certified Financial Guardian within your local proximity.