EPS-95 Pension Scheme

What is EPS 95 All About?

Launched on November 19, 1995, the EPS-95 Pension Scheme helps in retirement planning for eligible employees. If you're an existing or new member of the Employees' Provident Fund (EPF), you're automatically a part of this scheme.

But how does it get funded? While you, the employee, contribute your entire 12% of basic salary plus Dearness Allowance (DA) to your EPF account, a specific portion of your employer's contribution to your provident fund is sent to EPS 95.

Here's how it works:

• Your Employer's Contribution: Out of the 12% your employer contributes towards your provident fund, a significant 8.33% (up to a maximum pensionable salary of ₹15,000 per month) goes directly into the EPS 95 fund. The remaining 3.67% from your employer's share then joins your EPF.
• Government's Contribution: The Central Government also contributes 1.16% of your wages (again, up to the ₹15,000 limit) to add to the EPS fund.This pooled fund is then strategically invested by the EPFO to ensure it can fulfill its promise of lifelong pension payouts.

EPS 95 minimum pension

EPS 95 is an investment option that provides a guaranteed minimum pension to support eligible members with a basic level of financial security. Currently the fixed amount of EPS 95 minimum pension set by the government ranges from ₹1,000 to ₹ 7,500 monthly.

EPS 95 Pension Latest News

As per EPS 95 pension latest news; significant updates concerning higher EPS pensions have been issued. According to a press release by the Ministry of Labour & Employment on May 3, 2023, employees opting for a higher EPS pension are not required to make additional contributions.

Specifically:

• The additional 1.16% of salary, applicable to wages exceeding the statutory ceiling, will now be drawn from the employer's existing 12% provident fund contribution.
• This adjustment facilitates a potentially larger pension payout for eligible individuals.
• The application deadline for this higher pension option was extended to June 26, 2023.

Types of Pensions under the Employees’ Pension Scheme

By comparing different pension plans, you can select an ideal plan for your retirement as per your financial goals. The EPS-95 Pension Scheme provides various pension types to support members and their families:

• Widow Pension: Payable to the deceased member's widow until her death or remarriage. If there are multiple widows, the pension is paid to the eldest.
• Child Pension: Eligible children of a deceased member receive a monthly pension until age 25. This amount is 25% of the widow pension, payable to a maximum of two children.
• Orphan Pension: If a member dies without a surviving widow, their children are entitled to a monthly orphan pension. This is 75% of the widow pension value, benefiting up to two surviving children from oldest to youngest.
• Reduced Pension: An EPFO member with at least 10 years of service can opt for an early pension between ages 50 and 58. The pension amount is reduced by 4% for each year it is availed before 58 years of age.

Eligibility for EPS 95 Pension

The following eligibility criteria is to be met to exercise the benefits of EPS 95 Pension:

• You must be a member of the Employees' Provident Fund Organisation.
• You must have served a minimum of 10 years in service.
• Typically the retirement age is 58 years for a regular pension. Reduced pension rates are applicable for early retirement between 50 and 58 years of age.
• An increase of 4% per annum is provided for members who defer the commencement of their pension until 60 years of age.

Special Cases:

• Eligibility for withdrawal of the EPS amount, without receiving a monthly pension, may apply if service is less than 10 years but more than 6 months, and the member has been unemployed for over two months.
• In cases of total and permanent disability, a monthly pension is provided irrespective of the length of service, provided the employer has made at least one contribution to the employee's EPS account. A medical examination is required for verification.
• Family members are eligible for pension benefits if the employee passes away while in service.

EPS 95 Pension Rules 

Given below is a list of rules in relation to the Employee Pension Scheme 95:

• Mandatory Enrollment: If your monthly earnings are ₹15,000 or less, enrollment in EPS 95 is generally mandatory.
• Employer's Timely Contributions: Employers are required to deposit contributions within 15 days of each month's closing.
• Family Support: In case of a member's death, if the widow/widower remarries, the children will continue to receive the pension, ensuring their financial support.
• Seamless Transfers: If you switch jobs, you can easily transfer your EPS account using forms like Form 11 (and Form 13 if you don't have a UAN linked with Aadhaar KYC).
• Stay Informed: You can always check your monthly EPS contributions in the last column of your EPF passbook, available for download from the EPF passbook portal.
• Forms for Benefits: Various forms are used for different claims, such as Form 10C for withdrawal (before 10 years of service) and Form 10D for monthly pension withdrawal (after age 50). A 'Life Certificate' needs to be submitted annually to certify that the pensioner is alive.

How to Calculate Your Pension Under EPS

The pension amount in PF depends on the pensionable salary and the pensionable service of the member.

Monthly Pension Formula = (Pensionable Salary × Pensionable Service) / 70

Let's break down the terms:

• Pensionable Salary: This is the average of your monthly basic salary plus Dearness Allowance (DA) during the last 60 months (5 years) before you exit the EPS scheme. (Historically, this was based on the last 12 months, but the Supreme Court's 2022 decision updated this to 60 months). Unless you opted for the higher pension on actual wages, this amount is generally capped at ₹15,000 per month.
• Pensionable Service: This refers to the total number of years you've contributed to the EPS account. It's rounded off to the nearest year, meaning if you've served for 6 months or more in a year, it counts as a full year. Plus, if you superannuate at 58 with over 20 years of service, your service tenure gets an additional 2-year bonus for calculation purposes! 

For pension plans other than EPS, you can use a pension calculator to estimate the potential retirement income you might receive based on their savings and other factors.

Benefits of EPS 95 Pension

The benefits of EPF95 pension are: 

• Retirement Income from Age 58: Your primary benefit is a steady monthly pension starting at age 58, provided you've completed the minimum 10 years of service. This gives you a reliable income stream to cover your living expenses in retirement.
• Protection Against Disability: Should you face permanent and total disability, EPS 95 ensures you receive a monthly pension for life, offering crucial financial support even if your service period was short.
• Family Security in Case of Demise: The scheme extends its benefits to your family under specific circumstances of your passing:
  • If you complete 10 years of service but pass away before age 58.
  • If you pass away after you've already started receiving your monthly pension.
  • If you pass away while still in service, provided your employer has made at least one contribution to your EPS account.
  • This provides vital financial assistance to your spouse and children during difficult times.
• Withdrawal Option Before Pension Eligibility: If circumstances prevent you from completing 10 years of service and you reach 58 years of age, you might be able to withdraw the accumulated amount by filling out Form 10C, although this means foregoing the lifelong monthly pension.

Conclusion 

The Employees' Pension Scheme, 1995, is more than just a government initiative; it's a commitment to your financial well-being in the years to come. By understanding how it works, its eligibility, and the benefits it offers, you can confidently look forward to a more secure and comfortable retirement. It's truly a valuable instrument for building a stable financial foundation for your future and for the peace of mind of your loved ones.