Employee Pension Scheme – Eligibility, benefits and how to apply

To support the workers in the organized sector with pension facilities after retirement, the Employee Pension Scheme (EPS) was introduced in 1995. Let us discuss the details of the policy, features and benefits, in this post.

The Employee Pension Scheme or EPS was introduced to support employees working under various companies within the organized sector with pension schemes. The EPS scheme applies to all the employees who come under the scheme of Employee Provident Fund (EPF). Let us understand the Employee Pension Scheme details better in the post ahead.

What is the Employee Pension Scheme (EPS)?

The Employee Pension Scheme is a social security scheme administered by the Employees’ Provident Fund Organization (EPFO). This scheme was initiated for the organized sector employees to enroll and avail pension facility after they retire at the age of 60. The benefit of EPS scheme can be availed by both new and the existing members of Employees’ Provident Fund (EPF).

Under EPF, employees contribute 12% of their basic salary combined with their dearness allowances. The equal amount (12% share) is also contributed by employers towards the EPF fund too.  In case of employee contribution, the entire 12% goes to their EPF fund. On the other hand, in the case of employers’ contribution 8.33 % of the amount goes to EPS account and the remaining 3.67% goes towards the EPF account. This scheme allows the employee to avail a steady source of income once they retire.

The pension amount that the recipient receives every month under the EPS scheme is INR 1,000, which is the minimum amount. The EPF account is mandatory for every employee with a salary  less than INR 15,000.

Employee Pension Scheme (EPS) – Eligibility 

The EPS pension scheme has certain eligibility criteria for EPF pension rules that requires to be met to avail the benefits under the scheme as mentioned below:

• The individual interested to have a EPS account must be a member of the EPFO or Employees Provident Fund Organization.
• Individuals who have completed at least 10 years of service and are at least 50 years of age can benefit from the EPS scheme to avail pension. However, to get pension on a regular basis, one must be at least 58 years and above.
• In case the EPS account holder defer the pension for 2 years till they reach 60 years of age, the person becomes eligible to get an additional 4% rate of interest per year on the pension amount.
• It is a must for an EPS applicant to complete 10 years of service to be eligible for the plan.

Employee Pension Scheme (EPS) – Functioning

You may note that an employee cannot contribute under EPS directly. So, the direct contribution towards an EPS account goes from the employers’ only.  Out of the 12% contribution that goes from the employer, 8.33% goes towards EPS, while the remaining 3.67% goes towards the EPF account of the employee. In case of the employees’ contribution, the entire 12% goes towards EPF. Hence, overall 15.67% of total contribution including employers’ and employees’ goes to EPF, while 8.33% of the amount goes to EPS.

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Employee Pension Scheme (EPS) – Features

Below are the salient features of the Employee Pension Scheme:

• Having an EPF account is a must for an individual to be eligible for EPS
• EPS gets contributions only from the employers
• As per age and duration of service, an individual can withdraw EPS amount early
• The EPS account can be carried forward to the next job also
• If the account holder changes jobs, only the EPF account is transferred to the new organization, whereas the EPS account is not transferred. Rather, it is held in trust by the EPFO
• So, in case of switch in job the contributions made towards EPS stays with the EPFO

Employee Pension Scheme (EPS) – Benefits

Here are the benefits of EPS account as mentioned below:

• EPS provide fixed retirement income to individuals at 58 years or at 50 years in case of early retirement.
• Under EPS, the account holder can withdraw the entire pension amount at 58 years of age. However, the condition is that the individual should have completed 10 years of service before turning 58 years.
• EPS also allow account holders who are totally and permanently disabled to receive monthly pension even if they do not complete the total pensionable service period.
• The scheme allow pension to the family members of the account holder if he/she dies in an unfortunate event before or after the age of pensionable service term.

Employee Pension Scheme (EPS) – Types

The EPS account provides several types of pensions as mentioned below:

• Widow Pension – EPS plan provides pension amount to the widows in a family under Vridha pension or Widow pension scheme. Here, windows can receive the amount until she remarries or dies. The pension amount is paid to the eldest member (widow) in the family (if the family has more than one widow).
• Child Pension – If the pensionable member of EPS plan dies suddenly, the surviving children of the family receive a monthly child pension. The amount received in this case is 25% of what is received under the widow pension. The amount is paid to the child until he/she turns 25 years of age to a maximum of two children in a family.
• Orphan Pension – The orphan pension offered under EPS plan is 75% of the monthly widow pension. The amount is payable to a maximum of two surviving children if the pensionable member dies and if there is no surviving widow in the family.
• Reduced Pension – Reduced pension is offered to the pensionable member if the person has already completed service duration of 10 years and are above 50 years of age. However, the individual has to be less than 58 years to withdraw pension early. Here, the payable amount is lowered at 4% rate for each year that is less than 58 years.

Employee Pension Scheme (EPS) – Status Check

To check the EPF status, follow the steps below:

• Visit https://mis.epfindia.gov.in/PensionPaymentEnquiry/pensionStatus.jsp
• Select the particular office and select the right office ID
• Submit your PPO No. and press the submit button to get status
• You can see the details in the page displayed

Employee Pension Scheme (EPS) – Calculate Pension Under EPS

The pension amount in EPF account depends on two things:

• Pensionable salary of the EPF account holder
• Pensionable service of the EPF account holder

The  monthly pension amount of the account holder can be calculated using the below formula:

EPF Member’s Monthly Pension is equal to  Pensionable salary multiplied by Pensionable service divided by 70

Monthly pension = pensionable salary x Pensionable service/70

Pensionable salary – It is the average monthly salary earned by the EPF member in the last 12 months prior to exiting the EPS scheme.

Pensionable service – Pensionable service is the actual service period of the EPF member under the EPS scheme. This includes the service periods under different employers (added together) at the time of calculating the pensionable service period.

Every time the EPF member switches a job, he has to get the EPS Scheme Certificate issued and submitted to the new employer.

Employee Pension Scheme (EPS) – Withdrawal

Here are the rules to follow for withdrawal of pension contribution under EPS:

EPS plan holder has served fewer than 10 years of service 

Employees can withdraw their EPS amount if they left employment without completing ten years of service. For employees who are still working and have not completed 10 years of service cannot withdraw EPS amount. Moreover, employees who leave a job can withdraw the EPS amount before he/she joins another organization.

Further, employees can withdraw EPS amount via the EPFO portal with the help of claiming form 10C. For this, the basic requirement is that the employee should have an active UAN, which should be linked to the KYC details. Here, the employee can withdraw a certain percentage of the EPS amount based on the years of service.

EPS plan holder has served more than 10 years of service

Any employee under EPS plan can withdraw the amount from the scheme by filing Form 10C.

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Employee Pension Scheme (EPS) – Forms

 

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