Employee Pension Scheme (EPS)

The Employee Pension Scheme came into effect in the year 1995 for the convenience of the 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 EPS (Employee Pension Scheme) which is effective from 1st September 2014, the employee pension fund in India is distributed as 12% of the salary of the employee’s which is accumulated in the EPF account of the employee. For the employee pension fund, 12% of the salary of the employer is divided into 3.67%, 8.33% for EPS, and 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.1000 and all the 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 been increased from Rs.1.56 lakhs –Rs.3 Lakhs.

Eligibility for Employee Pension Scheme

Following is the eligibility criteria to avail the benefits of the Employee Pension Scheme (EPS):

  • 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 he/she 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.

How Does Employee Pension Scheme Work?

Only the employers can contribute towards EPS, 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 EPS.

  • 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 his/her job the contribution made towards EPS is kept with the Employees’ Provident Fund Organization (EPFO).

EPS Calculation Rules

There is a simple and easy rule to calculate the Employee Pension Scheme amount for all the individuals availing 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.

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 16th 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 EPS. 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.

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 15th 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 he/she has 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.

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.

EPS Withdrawal

  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 he/she 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 EPS 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 EPS amount by filing Form 10C.

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 he/she has 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.

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