Employee Pension Scheme (EPS)

The EPS full form is the Employee Pension Scheme that came into effect in the year 1995 for the convenience of employees working under different organizations and companies. All the employees who come under the Employee Provident Fund Scheme are entitled to Employee Pension Scheme.

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About Employee Pension Scheme (EPS)

According to the latest changes made in Employee Pension Scheme (EPS), effective from 1 September 2014, the employee pension fund in India is distributed as 12% of the employee's salary, which is accumulated in the EPF account of the employee. For the EPS pension scheme, 12% of the salary of the employer is divided into 3.67%, 8.33% for EPS, 1.1% as admin charge for EPF, 0.5% for EDLI, and 0.1% as EDLI admin charges. The minimum pension amount offered under the employee pension scheme is Rs. 1,000, and all employees whose salary is below 15,000 per month are mandatory to have an EPF account. Employee deposit linked insurance scheme (EDLI) coverage for the employees has increased from Rs.1.56 lakhs to Rs.3 Lakhs.

Eligibility for Employee Pension Scheme

The following are the eligibility criteria to avail of the benefits of the EPS pension scheme:

  • The individual must be a member of the EPFO (Employees Provident Fund Organization)

  • To get the pension benefit under EPS, one is needed to complete ten years of service and should have reached the age of 50 years to get early pension. For a regular pension one must be at least 58 years old.

  • In case of non-payment of pension for 2 years before the age of 60, the pension will be receivable at an additional rate of 4% annually.

  • Employee Pension Scheme is eligible only if an individual has completed at least 10 years of service.

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How Does Employee Pension Scheme Work?

Only the employers can contribute towards EPS, and the employee cannot contribute towards EPS directly. The employer's contribution of 8.33% goes towards the employees' pension scheme, and the remaining 3.67% goes towards EPF. Hence, in total, including the contribution of the employees, 8.33% of the amount is contributed towards EPS, and 15.67% is contributed towards EPF.

Features of Employee Pension Scheme (EPS)

Let's take a look at some of the salient features of the Employee Pension Scheme.

  • To be eligible for EPS, one must have an EPF account.

  • Only the employers contribute towards EPS.

  • An individual can withdraw EPS amount depending on their duration of service and age. Moreover, the EPS can also be carried forward to the next job.

  • In case of a job change, only the employee pension fund is transferred to the new employer, whereas, the EPS is not transferred.

  • In case the employee changes their job, the contribution made towards EPS is kept with the Employees' Provident Fund Organization (EPFO).

People also read: National Pension Scheme

EPS Calculation Rules

There is a simple and easy rule to calculate the Employee Pension Scheme amount for all the individuals availing of the benefits of this scheme. In EPS, if,

  1. The Employee Has Offered Their Service for 6 Or More Months:

    The service offered is rounded up to 1 year

  2. The Employee Has Worked for Less Than 6 Months:

    The service offered for that financial year will not be taken into account

In simple words, if an employee has worked for 10 years and 7 months in an organization, then 11 years of service will be taken into consideration. However, if the employee has worked for 10 years and 4 months, 10 years of service will be considered.

People also read: best pension plan in india

What is Pension Contribution in EPF (Employee Provident Fund)?

Dearness Allowance (DA), along with a 12% contribution by the employee and the employer from the employee's basic salary, is the pension contribution on EPF. The 12% contribution by the employer is divided in the following ways:

  • EPF (Employee Provident Fund) Contribution: 3.67%

  • EPS (Employee Pension Scheme) Contribution: 8.33%

The Process to Check the Balance of the Employee Pension Scheme

A Universal Account Number, popularly known as the UAN number, is used to check the Employee Pension Scheme account balance on the EPFO (Employee's Provident Fund Organization) portal.

It is important to have an active UAN number to carry out the process. After the activation of the UAN number, the following steps need to be followed to check the EPF Balance:

  • Visit the official website of EPFO that is https://www.epfindia.gov.in/site_en/index.php.

  • Under the Services dropdown, select the "For Employees" section.

  • Scroll down and select the "Member Passbook" option under the "Services" option.

  • Enter the correct credentials, like,

    • User Name, which is the UAN number

    • Password created

    • Captcha details on the screen

    • Finally, click on "Login."

  • Next, click on your respective Member ID for the EPS pension scheme account.

  • What is the pension contribution in EPF till date will be displayed on the screen under the "Pension Contribution".

  • You can easily download the details for your future reference.

People also calculate: National Pension Scheme Calculator

Calculation Process of EPS

Calculation of monthly pension of the employee is divided into 2 sub-categories:

  • Calculation of pension for employees who started working before 16 November 1995

  • Calculation of pension for employees who started working after 16 November 1995

Let us understand the calculations for both categories mentioned above in detail:

  1. For Calculation of Pension for Employees Who Started Working Before 16 November 1995

    In the case of an employee who joined an organization before 16 November 1995, the pension amount is directly related to the salary bracket they fall in. Here is the pension break-up as per the salary bracket of an employee:

    Years of service Pension Amount (In case the salary is Rs.2,500 or less) Pension Amount (In case the salary is more than Rs.2,500)
    10 years Rs. 80 Rs. 85
    from 11 years to 15 years Rs. 95 Rs. 105
    from 15 years to 20 years Rs. 120 Rs. 135
    More than 20 years Rs. 150 Rs. 170

    *All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

  2. For Calculation of Pension for Employees Who Started Working After 16 November 1995

    A simple formula is used to calculate the pension for employees who started working after 16 November 1995:

    EPS = (Pensionable salary X Number of years worked) / 70

    Where,

    Pensionable salary = monthly salary for the last 12 months before the employee exists from the Employee Pension Scheme.

    The number of years worked = The service period completed by the employee under the Employee Pension Scheme. EPS certificate is important for the employee before switching the job.

    It is important to know that two years bonus is added if the employee completes 20 years of service.

How to Withdraw Pension Contribution in EPF?

Following are the pension withdrawal rules under the Employee Pension Scheme:

  1. In case an individual has served less than 10 years of service

    The employee can withdraw the number of EPS even if they have not completed ten years of service. However, if an individual is in service and has not completed ten years then they cannot withdraw the EPS amount. EPS amount can only be withdrawn if the individual quits the company before joining the new company.

    The individual can withdraw the savings of EPS on the EPFO portal by claiming Form 10C. The employee should have an active UAN and link it to the KYC details to withdraw the savings from the employee pension scheme. Based on the years of service one can only withdraw a percentage of the Employee Pension Scheme amount.

  2. In case an individual has served more than 10 years 

    If the employee serves more than ten years of service, they can withdraw the Employee Pension Scheme amount by filing Form 10C.

Forms Related to Employee Pension Scheme

Form Name Filled By Benefits
Form 10C Nominee or member Scheme certificate Withdrawal benefit
Form 10D Member To avail pension after 50 years of age but before 58 years.

To avail pension after 58 years of age.  To avail a disability pension.
Form 10D The beneficiary or widower/widow or children To avail family pension.  To avail beneficiary or dependent pension. To avail orphan or children pension.
Life Certificate Pensioner To be submitted by nominee or children every November. To be submitted pension disbursing bank manager.
Non-remarriage certificate Widow/widower To be submitted by widower annually. To be submitted by the widow at the initiation of pension.  To be submitted pension disbursing bank manager.

Terms & Conditions of EPS

Let's take a look at some of the significant terms and conditions of the Employee Pension Scheme.

  • To avail pension under an employee pension scheme, an employee must complete ten years of service.

  • An individual can avail pension only if they have obtained 50 years of age.

  • It is not allowed to have more than one EPF account.

  • The government contribution towards EPF is limited to up to 1.16% of Rs. 15,000. The maximum government contribution in a pension account is Rs.174.

Availing the Pension from EPS

The pension of the employee under EPS is computed for two categories. The first category is for those who joined EPS before 15 November 1995, and the other is for those who joined EPS after this date. In case the individual has completed ten years of service, he/she is eligible to claim pension once they obtain at the age of 50 or 58.

One can also avail pension through the process of superannuation wherein one is required to complete ten years of service and can continue to work and is above 58 years of age. However, no fresh contribution to EPF will be made. An individual can take an early pension in case they have served ten years of job, has obtained 50 or 58 years of age, or is unfit for a job because of permanent/ total disability. In case of the demise of the individual, the pension is provided to the spouse and two children. However, the children must have to be less than 25 years of age to get the pension benefit.

How to Claim Pension Amount?

  1. In Case the Individual Has Scheme Certification of Pension

    Once the employee reaches 50 years of age, they are entitled to receive a pension by scheme certificate. To avail of the regular pension, the employees are needed to fill from 10-D. In case, one holds more than one scheme certificate then they can directly visit the EPF office. However, one needs to get the attestation done by the bank manager of the employee's 10-D form.

  2. In Case One Does Not Has Scheme Certification of Pension

    If the employee has not completed 10 years of a job, then they can claim the pension refund. To do so, the employee is required to fill the 10-C form and EPF withdrawal form and submit it through the employer.

FAQ's

  • Who is eligible for EPS?

    Ans: Following are the eligibility criteria:
    • The individual must be a member of the EPFO (Employees Provident Fund Organization)
    • To get the pension benefit under EPS, one is needed to complete ten years of service and should have reached the age of 50 years to get an early pension. For a regular pension, one must be at least 58 years old.
    • In case of non-payment of pension for 2 years before the age of 60, the pension will be receivable at an additional rate of 4% annually.
    • Employee Pension Scheme is eligible only if an individual has completed at least 10 years of service.
  • What is the difference between EPF and EPS?

    Ans: Even though both Employee Pension Scheme and Employee Provident Fund are government-initiated pension schemes, there is a subtle difference between them.
    On the one hand, EPF is a retirement scheme under which Dearness Allowance (DA), along with a 12% contribution by the employee and the employer from the employee's basic salary, is the pension contribution made. On the other hand, one must have an EPF account to be eligible for EPS. The 12% contribution by the employer is divided in the following ways:
    • EPF (Employee Provident Fund) Contribution: 3.67%
    • EPS (Employee Pension Scheme) Contribution: 8.33%
  • How can I withdraw my pension amount from PF online?

    Ans: To withdraw the pension amount, below-mentioned steps needs to be followed:
    • Visit the official website of EPFO that is https://www.epfindia.gov.in/site_en/index.php.
    • Login with the following details,
      • User Name, which is the UAN number
      • Password created
      • Captcha details on the screen
    • Under the "Manage" dropdown, select the "KYC" section.
    • Check all your details like PAN, bank details, and Aadhaar, and their verification.
    • After the completion of KYC, select the "Claim (Form-31, 19 10C & 10D)" under the "Online Services" dropdown.
    • Enter your bank details and agree with the terms and conditions under the "Certificate of Undertaking".
    • Now, one can proceed with the "Claim."
    • Select all the details related to the claim,
      • Full settlement or partial withdrawal.
      • PF Advance Form 31 for withdrawal.
    • Click on the submit button after filling in the details.
    • Once processed, the claim will take around 15-20 days to settle.
  • Can I withdraw full pension amount?

    Ans: One cannot withdraw full pension amount while still working. An employee can make withdrawals only when they have been unemployed for a minimum of 2 months (also, the employment tenure should be less than 10 years and more than 6 months).

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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Your expenses in 2043, at the age of 55 Yrs
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₹14,300/month
Calculated as per past performance of 15%
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