All You Need To Know about Employees’ Pension Scheme (EPS)
EPF pension scheme was launched by the government in 1995 and, hence, is also called the Employees Pension Scheme 1995. It includes both new as well as existing EPF members. The EPS pension scheme has certain arrangements in place if a member wants to withdraw pension funds.
Table of Contents:
What is EPS?
The EPS is a scheme by the Employee’s Provident Fund Organization (EPFO), which aims at social security. This scheme is for the pension of the employees working in the organized sector, after their retirement at 58 years.
The advantages or benefits of this scheme are only to be availed if the employee has served for a minimum of (continuous or non-continuous) 10 years. EPS pension was made available from 1995 and later retained for existing and newly joined EPF employees since.
Eligibility criteria for EPS
To avail the benefits of pension under the Employees’ Pension Scheme, your employees should meet the following eligibility conditions. The individual should:
- Be an EPFO member
- Complete 10 years of active service along with equal years of active contribution towards the EPF pension Scheme
- Be 58 years or above
- Have attained at least 50 years of age to withdraw from the EPS pension at a lower rate
- Delay withdrawing the pension for by 2 years, i.e., till he or she is 60 years, to become eligible to get EPS pension at a rate of 4% annually
Different EPS and EPF pension types
As per the EPS pension scheme, an employer can provide different kinds of pensions to the employees. Here are some pension types:
Also known as Vridha pension, wherein, a widow of the deceased EPFO member is eligible for this pension. The pension is paid to the widow until her death or remarriage. In case of more than one widow, the pension value is paid to the oldest widow.
The amount for a monthly payout of the widow pension is calculated according to Table C of the Employees Pension Scheme 1995. As on date, the minimum pension amount has been increased to INR 1,000.
Under child pension, If the EPS member is deceased, their surviving children become applicable to receive a monthly pension from the pension contribution in EPF. This is in addition to the widow pension to the deceased’s wife. The monthly payouts will be applicable until the child turns 25 years old. The pension can be paid to a maximum of two children and the payable amount is 25% of the widow pension amount.
If the EPFO member dies and does not have any surviving widow, then his children are entitled to receive a pension under the orphan EPF pension scheme. Under this, the orphan or orphans receive 75% of the widow pension monthly.
An EPF pension scheme member can withdraw early pension if he or she has attained the age of 50 but is less than 58 years old, and, if they have made an active pension contribution in EPF for 10 years or more. In such cases, the pension value is reduced to a rate of 4% per year until the employee reaches the age of 58 years.
For example: if an EPF pension member, who is 56 years of age, wishes to withdraw reduced pension monthly, then he or she will get the payouts at the rate of 92% of the original pension amount. It is calculated as 100% – (2*4) = 92%.
EPS Pension forms details
An EPFO member of the survivor has to fill various EPS forms depending on their eligibility criteria to avail the benefits of the Employees’ Pension Scheme.
The Employees’ Provident Fund (EPF) is a retirement benefit as per the EPFO Act 1995, wherein, the member invests part of his salary every month and the employer makes an equal pension contribution in PF towards his/her EPS pension account. When a member switches jobs, he/she can transfer the EPF amount to a new account or withdraw the amount by submitting an EPS scheme certificate and filling the necessary EPS form. EPS Form 10C, however, can be used to withdraw the accumulated pension amount after a continuous service of 180 days and before the completion of 10 years of active service.
Form 10D is the general form that a member needs to fill to withdraw monthly pension after the age of 50 years. This EPS form can also be filled to withdraw monthly child pension and widow pension too.
Life certificate has to be submitted in November every year by the member or the beneficiary of the pension to certify that he or she is still alive. This form should be submitted in person by the beneficiary to the branch manager of the bank with the active pension account details.
This form is a declaration that the widow/widower of the pensioner has not remarried. This declaration has to be submitted every year in November by the widowed individual. The widow will have to furnish this certificate once at the time of the commencement of the pension.
Pension benefits under EPS
Eligible EPS pension members can avail the benefits of the pension according to the age from which they start the withdrawals. For different cases, the value of the pension is also different.
Pension at 58 years
The member is eligible for the benefits of pension after his/her retirement, that is, after 58 years of age. However, for this, they should have compulsorily made an active pension contribution in EPF for 10 years, at least, before their retirement to avail the pension benefits. Post-retirement, the EPS pension scheme certificate gets generated. This certificate is required to fill up form 10D to withdraw the pension monthly.
Pension on discontinuing service without fulfilling the criteria
If the member discontinues service or is unable to stay in duty for 10 years prior to 58 years of age, he/she could withdraw the entire amount once they attain 58 years of age by furnishing form 10C.
Pension on absolute disablement
If the EPFO member becomes completely and permanently disabled, then he/she is qualified to receive monthly pensions, irrespective of them not having served the minimum service period required to get monthly pensions. Their employer must deposit EPF minimum pension funds into their EPF account for a minimum of 1 month for them to become eligible for this pension.
A member can avail the pension benefits monthly from the very date of disablement and get paid for his/her lifetime. But, the member has to take a medical test to ascertain that he/she is not fit for the work that they were doing before getting disabled.
Pension if the member is deceased
The family of the EPFO member becomes eligible to receive the EPS pension (or, EPF pension) in the below-mentioned cases:
- If the EPFO member dies after the commencement of monthly pension
- If the EPFO member dies before the age of 58 but has completed the 10 minimum years of active service contribution
- If the member dies in the service duration and the company or employer has deposited pension funds in the members EPF account for a minimum of 1 month
What happens to the EPS amount in case of a change in jobs?
Previously, while switching employment, you had to submit out two forms:
- Form 11 to certify that you are a member of Employees’ Provident Fund (EPF) schemes
- Form 13 to have your PF balance moved from the previous company to the current one.
If you have an existing Universal Account Number (UAN) and your Aadhaar is validated for KYC in the EPF database, a composite Form 11 can now fulfil both functions. Everyone else must still complete Forms 11 and 13.
How Does Employee Pension Scheme Work?
Employees’ Pension Scheme (EPS), often called EPF Pension, is a social security scheme administered by the Employees’ Provident Fund Organisation (EPFO). The system provides for a pension after retiring at age 58 for employees who work in the organized sector. Nevertheless, the scheme’s perks are only available if the worker has worked for the company for at least 10 years (the service doesn’t have to be continuous).
EPS was introduced in 1995, and it enabled both new and existing EPF members to participate. Both of the contracting parties contribute 12% of the employee’s wage to the EPF. Every month, the employee’s complete part is given to the EPF, 8.33% of the employer’s portion is donated to the Employees’ Pension Scheme (EPS), and 3.67% is contributed to the EPF.
The process to check EPS balance
Here are the steps that’ll help you check your EPS balance.
Step 1: Visit the official EPFO portal
Step 2: Under the “Services” dropdown menu in the top left corner click on “For Employees”
Step 3: Then click on “Member Passbook” under Services
Step 4: On the member passbook portal click on the “Login” button after entering your UAN, password, and solving captcha.
Step 5: “Select Member Id” from the dropdown and click on the “View Passbook” button on the right to display all the pension contributions by the employer till date and the total EPS balance. Alternatively, you can download a PDF version of the same by clicking on the “Download Passbook” button.
Calculation of EPS
The monthly EPS or pension amount an employee receives after retirement is based on the pensionable service and pensionable salary. It is calculated as per the following formula:
Member’ Monthly Salary = (Pensionable Salary*Pensionable Service)/70
Pensionable Salary: The average monthly salary received by an individual in the last 60 months, before he/she decides to exit the Employees’ Pension Scheme.
Pensionable Service: It is the service period — or the duration of employment — of an individual. It is calculated as the total of service periods under different employers. In the event of a job switch, the individual must obtain an EPS Scheme certificate and hand it over to the new employer.
As mentioned earlier, this pension fund can be withdrawn prematurely, but only after the employee has served a term of ten non-continuous years of service. This fund is taxable, and various tax benefits can be availed on the consolidated amount.
The two scenarios of EPS withdrawals
There are two cases under which you can withdraw your pension amount.
- For service exceeding 10 years
In this case, an individual can withdraw pension fund by filling Form 10C.
- For service not exceeding 10 years
There are a couple of points to remember for such a case:
- The pension fund can be withdrawn on the EPFO portal via Form 10C
- The percentage of pension amount that can be withdrawn depends on the number of years of service
- The individual’s UAN must be linked with KYC on the portal
For this case, service cannot be more than 10 years. For this too there are different scenarios. If an individual is still in service and hasn’t completed 10 years, EPS amount cannot be withdrawn. The pension amount can only be encashed during the interval between the exit from one service and the beginning of a new service.
Terms & Conditions of EPS:
- The employee must be an EPFO member (Employees Provident Fund Organization)
- One must have completed 10 years of service and be over the age of 50 to receive an early pension under EPS. To be eligible for a normal pension, you should be at least 58 years of age.
- In the event that a pension is not paid for two years before reaching the age of 60, the compensation will be increased by 4% every year.
- An individual is only eligible for the Employee Pension Scheme if he or she has served for at least 10 years.
Difference between EPF and EPS:
The provident fund scheme encourages individuals to save for their retirement. According to the scheme, both the employers and employees of a business contribute to the employee’s provident fund account. The contribution accumulates until the individual’s whole working time, after which the employee can take a lump-sum payment with interest.
Employees who are EPFO members and have invested in the EPS account are eligible for a pension under the pension system. When such an employee dies, the pension is continued to be paid to the nominee. Employees make no contributions to the EPS account. The employer contributes 8.33% of the employee’s salary (basic plus dearness stipend). After the age of 58, the employee receives a pension from such a system.
Features of the EPS
- EPS is an initiative of the Indian government, therefore, the returns are guaranteed; investing in this scheme does not involve any risks. The amount to be returned is fixed and there will be no changes.
- For employees earning Rs 15,000/- or less each month, it is mandatory to enrol in the scheme.
- In case of the EPFO member’s widower/widow getting remarried, the pension amount is to be left to the children who will be categorised as “orphans”.
- Employees enrolled in the EPF pension scheme are automatically enlisted in the EPS scheme.
- Rs 1000/- is the minimum pension amount that the individual will receive.
Employees Pension Scheme and Employees Provident Fund are two great instruments to deposit and save your money for a better future. These tools also help you save taxes on the interest earned. A few important points to remember are:
- The employer makes all the contributions to the Employees Pension Scheme account
- The employer contributes 8.33% of the employee’s pay towards the EPS, which includes the basic and the dearness allowances
- The employer has to contribute the amount in the first 15 days of the month
- All applicable costs of the contribution must be borne by the employer
- To avail the pension benefits, the individual should be in active service for a minimum of 10 years, which also includes the same number of years of active contribution towards the EPS
- If an individual has not finished 10 years but has completed a minimum of 6 months of service, he or she could withdraw the EPS pension amount if they are unemployed for 2 or more months
- As per the EPS pension scheme, the retirement age is fixed at 58 years
- The employee is no longer a member of the pension fund when the employee starts availing reduced EPS pension benefits or after reaching the individual’s lifetime of 58 years
For more information on anything related to EPF pension and EPF pension, subscribe to our blogs as we will share the latest EPFO pension news regularly.
Employee Pension Scheme (EPS): FAQs
1) What is the maximum EPS contribution?
EPS is calculated as 8.33% of basic. There is an INR 15,000 the basic salary so the maximum EPS contribution by the employer will not exceed INR 1,249.5.
2) For a case where both parents have passed away is the dependent child entitled to the pension?
Pension is paid to the dependent child as an orphan pension which is 75% of the pension that would’ve been paid to parents.
3) How is EPS transferred online?
With the help of the Composite Claim Form. An individual must apply for EPF transfer during a job change via the EPFO portal.
4) Is the employee holding the EPS account the only beneficiary?
No. In the absence of the employee, the amount can be claimed by dependants.
5) Who falls under the the ‘dependants’ category for pension benefits?
In the absence of the individual holding the EPS account, the spouse or children can claim the amount. For a case with no spouse/children, the amount can be claimed by the nominee declared by the individual. For no nominee, pension amount will go to the individual’s parents.
6) How is the pension amount derived under the Widow Pension Scheme? Will the Ministry increase the amount?
The pension amount is derived on the basis of the pension wage at the time of the demise of an employee and the tenure of employment. Furthermore, the change can hinge on the proposals made by the ministry.
7) Will a subscriber’s service tenure be counted as 10 years if he has completed, for example, 9 years and 7 months of service?
Yes, since the subscriber has exceeded 9.5 years of service, it will be considered as 10 years. In other words, he/she will be eligible for pension upon attaining 58 years of age.
8) What is the process for elderly and the sick pensioners who are physically unable to process/submit documents?
EPS pensioners can also submit Digital Life Certificate(DLC) via the UMANG app. To facilitate the process, India Post Payments Bank has recently launched the doorstep Digital Life Certificate service for pensioners. They can submit an online request to avail doorstep DLC service on payment of a nominal fee.
9) Is it mandatory to transfer PF amount under different PF accounts to the current (active) PF account to get pension?
Yes. In order to avail pension benefits, the subscriber must apply for an online transfer of the funds from previous employers’ PF accounts to the current employer’s PF account.
10) What are the various benefits a spouse is entitled to receive in the event of the subscriber’s (PF account holder) demise?
If the subscriber passed away during service, the nominee will get the settlement of PF dues with interest, EDLI benefits, and widow pension. To avail the said benefit, the spouse (nominee) needs to contact the establishment where their spouse worked.
Latest news on EPS (Employee Pension Scheme)
You Can Now Get EPF Scheme Certificate on UMANG App
October 01: Introduction of the UMANG App (The Unified Mobile Application for New-age Governance) is a huge relief to EPF subscribers as it enables them to access various EPF services effortlessly. The Labour Ministry stated that, out of the 47.3 crore hits gained by the app since August 2019, 41.6 crore (88%) were for the EPFO services.
Along with the existing 16 services, EPFO recently introduced a new app feature enabling the members to apply for the Scheme Certificate under Employees’ Pension Scheme, 1995. The Scheme Certificate is provided to existing and active EPFO members who wish to withdraw their contribution but desires to retain their membership with EPFO. The certificate primarily focuses on the members who want to avail pension benefits. The Scheme Certificate assures that the member’s prior pension benefits are added to the pension service rendered with the new employer. Nominees can use the certificate to claim the family pension in case of the untimely demise of the contributor.
Update Jeevan Pramaan Patra And Other EPF Services via UMANG App
August 13: EPFO allows pensioners to access 16 different services via the UMANG app. The services include EPS passbook, life certificate (Jeevan Praman Patra) etc. The UMANG app has made the EPF related services much more hassle-free as it allows users to access all services from their mobile phones itself.
Newly added features such as updating Jeevan Pramaan Patra and EPS passbook has got great feedback from the existing members. “To ensure the safe and secure delivery of its services at the doorsteps on its 66 lakh pensioners, EPFO brought the facility of ‘View Pensioner Passbook’ as well as the updation of Jeevan Pramaan Patra on UMANG app,” stated EPFO.
As per the EPFO records, the ‘View Pensioner Passbook’ service alone has received about 29,773 API hits, while 29,773 hits recorded for the updating Jeevan Pramaan Patra service, from April to July 2020.
Subscribe For Newsletter
Subscribe to get the latest news and happenings around recruitment space