Employee Pension Scheme (EPS)

What is the Employee Pension Scheme (EPS)?

The Employee Pension Scheme (EPS) is a social security program in India that provides a pension to employees in the organized sector after their retirement. It was launched in 1995 by the Employees' Provident Fund Organisation (EPFO).

The EPS operates in conjunction with the EPFO Pension scheme to ensure financial stability for employees post-retirement.

Features of Employee Pension Scheme:

• Provides financial security: EPS pension scheme offers a guaranteed pension to employees after retirement, helping them maintain a regular income.

• Eligibility: All employees who are members of the EPF scheme are automatically enrolled in EPS.

• Contributions: Both employers and employees contribute 12% of the employee's salary (including basic salary and dearness allowance) towards the scheme. However, the contributions are divided:

  • The employee's entire 12% goes towards the EPF Pension account.

  • Out of the employer's 12% contribution, 8.33% goes toward the EPS pension account, and the remaining 3.67% goes to the employee's EPF pension account.

Eligibility for Employee Pension Scheme

There are three main requirements to be eligible for benefits under the Employee Pension Scheme (EPS) in India:

• EPFO Membership: You must be a member of the Employees' Provident Fund Organization (EPFO), which is usually automatic if you work for a company with 20+ employees.

• Minimum Service: You need at least 10 years of service by retirement.

• Retirement Age: Regular pension starts at 58, but you can choose a reduced pension from age 50.

IMPORTANT NOTE:

• Withdrawal Option: If you have less than 10 years of service and are unemployed for 2+ months, you can withdraw the EPS pension amount.

• Deferred Pension: Delaying your pension from 58 to 60 increases it by 4% per year.

• Disability Pension: Permanent disability during service qualifies you for a pension regardless of service length.

Eligibility to Withdraw Pension Contribution in EPS

Withdrawing your pension contribution from the Employee Pension Scheme (EPS) depends on your employment status and service period. You can learn more about different scenarios below:

1. While Employed:

   • Generally, you cannot withdraw your EPS contribution while actively working.

2. When Unemployed:

   • Less than 10 Years of Service: If you have between 6 months and 10 years of service and are unemployed for 2+ months, you can withdraw your EPS contribution.

3. Other Scenarios:

   • Reaching Retirement Age (58 years): You can withdraw your entire EPF balance, including the employer's contribution to EPS, upon retirement.

   • Early Pension (50 years): If you have completed 10 years of service, you can opt for an early pension, but the amount will be reduced, and you cannot withdraw the EPS contribution.

   • Death of Member: The nominee or beneficiary can claim the EPS amount along with the EPF pension balance.

   • Permanent Disability: If you become permanently disabled during service, you may receive a pension regardless of service length, and you might be able to withdraw a portion of the EPS contribution depending on the specific circumstances.

IMPORTANT POINTS:

• Withdrawing before retirement forfeits pension benefits.

• Consider long-term pension benefits before withdrawing.

• Submit Form 10C and the required documents for withdrawal.

How to Calculate EPS Pension Amount?

1. EPS Pension Formula:

   EPS Monthly Pension = (Service Period in Years x Pensionable Salary x Pension Factor) / 70

   Definitions:

   Service Period:

   • This is the total number of years an employee has contributed to the EPS scheme. 

   • There is a minimum service requirement of 10 years to be eligible for a pension.

   Pensionable Salary:

   • This is the average monthly salary earned by the employee during the last 5 years of service or the actual salary capped at a specific limit, whichever is lower. 

   • The pensionable salary was capped at Rs. 15,000 per month until August 2014. 

   • The employer contributes 8.33% of the employee’s monthly salary in their EPS account. 

   • Since September 2014, the EPS contribution is calculated on your actual basic salary without any cap

   Pension Factor:

   • This is a factor fixed by the Employees' Provident Fund Organisation (EPFO) to determine the pension amount. The current pension factor is 1/11.

   Important Points to Consider:

   • Both the employee and employer contribute 8.33% of the employee's salary towards EPS.

   • The EPS pension is subject to tax deductions as per income tax regulations.

   • You can use an EPS Pension Calculator to estimate your EPS pension.

2. Pensionable Service

   Definition: 

   • The total number of years an employee has contributed to the Employee Pension Scheme (EPS).

   Calculation: 

   • Your pensionable service is calculated in whole months. 

   • Any period of service of 6 months or more is considered as one full year. 

   • For example, if you worked for 7 years and 3 months, your pensionable service would be 7 years. However, if you worked for 7 years and 11 months, it would be rounded up to 8 years.

   Incomplete service: 

   • If you do not complete 10 years of service before turning 58, you cannot avail the monthly pension benefit. 

   • However, you can withdraw the entire EPS amount at age 58 using a specific form.

Important Points to Consider:

• Breaks in service: Periods of leave without pay may not be counted as pensionable service.

• Pension calculation: The formula for calculating your pension considers your pensionable salary and pensionable service.

Types of Pension in EPS

The Employee Pension Scheme (EPS) offers various pensions to provide financial security after retirement or in case of a member's death. Here are the main types of pensions under EPS:

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Pension Benefits Under EPS

Following are the EPS pension benefits for the eligible individuals under this EPFO pension scheme:

1. Monthly Pension:

   • Superannuation Pension: Begins at age 58.

   • Reduced Pension: Available from age 50 with proportionate reduction.

   • Disability Pension: Available regardless of service length if permanent total disability occurs.

2. Family Pension:

   • Payable to the nominee upon the member's death.

   • Includes spouse and children up to age 25.

3. Additional EPS Pension Benefits:

   • Orphan pension: Paid to surviving children if both parents pass away.

   • Widow pension: Paid to the spouse until death or remarriage.

   • Nominee pension: In the absence of a spouse and children, pension goes to the nominee.

EPS Pension Forms

EPS (Employee Pension Scheme) forms are typically related to the Indian Employees' Provident Fund (EPF), which is a social security scheme provided by the government to employees. 

The EPS is a part of this scheme that provides pension benefits to employees. Here are some common EPS forms:

NOTE:

• These forms can be obtained from the official website of the Employees' Provident Fund Organisation (EPFO) or your company's HR department. 

• It is important to fill out the correct form according to your specific situation and submit it along with the required documents to the concerned authorities for processing.

Process to Check EPS Balance

To check your Employee Provident Fund (EPF) balance, you can follow these steps:

1. Online Method: 

   • Visit EPFO Website: Go to the official Employee Provident Fund Organisation (EPFO) website.

   • Login: Log in using your UAN (Universal Account Number) and password.

   • Access Passbook: Find and click on the 'Member Passbook' or 'Pension Passbook' option.

   • View Balance: Your EPS balance will be displayed here.

2. SMS or Missed Call: 

   Alternatively, you may be able to check via SMS or missed call, if supported.

3. Mobile App (if available): 

   Use the official EPFO mobile app, if provided, to check your balance conveniently.

IMPORTANT NOTE:

• Always ensure you are accessing the EPFO pension services through official channels to avoid any fraudulent activities. 

• Additionally, keep your UAN and other credentials confidential to protect your account's security.

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What Happens to the EPS Amount in Case of a Change in Jobs?

When you change jobs, your retirement savings in the Employees' Pension Scheme (EPS) do not move directly.  Let us understand how it works:

1. EPF (Employee Provident Fund):

   • EPF constitutes your retirement savings, comprising contributions from both you and your employer. This sum can be shifted to your new employer's PF account.

2. EPS (Employee Pension Scheme):

   • EPS, funded solely by your employer (8.33% of your salary), remains with the EPFO (Employees' Provident Fund Organization) linked to your previous PF account. It does not transfer to your new employer.

3. Retaining EPS Contributions:

   Although EPS contributions do not move, they are not lost. It works in the following way:

   •  Linked to UAN: Your EPS account is linked to your Universal Account Number (UAN), which remains constant throughout your career, irrespective of job changes.

   • Continual Interest Accumulation: Even though not in your new PF account, the EPS amount continues to accrue interest in line with government regulations.

   • Claiming EPS Pension: At retirement (typically at 58), you can claim your pension benefit, calculated based on your total salary and the duration of EPS contributions across all jobs.

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4. Ensuring Seamless Transition and Benefit:

   To maximize your EPS contributions file Form 10C whenever changing jobs.  This form facilitates tracking of EPS contributions, ensuring accurate credit when claiming your pension.