The Employee Pension Scheme (EPS), launched in 1995, is a social security scheme provided by the Employee Provident Fund Organisation (EPFO) in India. The scheme offers pension benefits to employees working in the organized sector, providing financial security post-retirement.
It is important to understand EPS including its benefits, eligibility criteria, and calculation methods for employees who are planning their retirement. This guide covers all essential aspects of the Employee Pension Scheme.
Let’s explore what the Employees Pension Scheme is all about.
What is the Employee Pension Scheme (EPS)?
The Employee Pension Scheme ensures that employees receive a pension after retirement, providing financial stability. Both employers and employees fund the scheme, with contributions coming from the employer’s share in the Employee Provident Fund (EPF).
Key Features of EPS
- Eligibility: Employees who are members of the EPF scheme.
- Contribution: 8.33% of the employer’s contribution to EPF (12% of basic salary) goes towards EPS.
- Pension Benefits: Monthly pension post-retirement.
- Withdrawal Benefits: Available under certain conditions before retirement.
- Lifelong Pension: Provided to the employee, with provisions for family pension after the employee’s death.
EPS Contribution and Eligibility
Contribution Details
- Employee Contribution: 12% of the basic salary + dearness allowance goes to the EPF.
- Employer Contribution: 12% of the basic salary + dearness allowance, out of which 8.33% goes to EPS, and the remaining 3.67% goes to EPF.
Eligibility Criteria
- Employment: You must be employed in the organized sector and be a member of the EPFO.
- Service Period: A minimum of 10 years of contributory service is required for pension benefits.
- Age: Minimum pensionable age is 58 years. Early pension can be availed at 50 years with a reduced amount.
Types of Pensions under EPS
The Employee Pension Scheme (EPS), managed by the Employee Provident Fund Organisation (EPFO) of India, provides various types of pensions to employees in the organized sector. Here are the different types of pensions available under EPS:
1. Superannuation Pension
- Eligibility: This pension is available to employees who retire at the age of 58 years. To be eligible, the employee must have completed at least 10 years of service.
- Benefits: The pension amount is calculated based on the employee’s pensionable salary and the number of years of service. If an employee continues to work beyond 58 years but up to 60 years, they can defer the pension and receive a higher amount.
2. Reduced Pension
- Eligibility: Employees who wish to retire early can opt for a reduced pension. This option is available to those who are between 50 and 57 years of age and have completed at least 10 years of service.
- Benefits: A factor reduces the pension amount based on the number of years the exit age is below 58 years.
3. Disablement Pension
- Eligibility: This pension is for employees who become permanently disabled during their service period. There is no minimum service period required for this type of pension.
- Benefits: Calculate the pension amount in the same way as the superannuation pension, ensuring the employee has contributed to the EPS for at least one month before the disability occurred.
4. Widow Pension (Vridha Pension)
- Eligibility: The widow of a deceased member is eligible for this pension. The member should have been a part of the EPS and should have contributed to it.
- Benefits: The widow will receive the pension amount until her death or remarriage. The amount is calculated based on the deceased member’s pensionable salary and service period.
5. Child Pension
- Eligibility: Children of a deceased member who was an EPS subscriber are eligible for this pension.
- Benefits: Each child receives 25% of the widow’s pension amount until they turn 25. If the member is unmarried, the pension is distributed among eligible children.
6. Orphan Pension
- Eligibility: This pension is for the surviving children of a deceased member when there is no surviving widow.
- Benefits: Each orphan will receive 75% of the amount that would have been paid to the widow until they reach the age of 25 years.
7. Nominee Pension
- Eligibility: If an EPS member dies without leaving behind a spouse or eligible children, the nominee is entitled to receive the pension.
- Benefits: The nominee receives the pension amount that the member would have received as per the EPS rules.
8. Pension for Dependent Parents
- Eligibility: If the deceased member does not have a spouse, children, or a nominee, dependent parents can receive the pension.
- Benefits: The dependent parents will receive the same pension amount that would have been payable to the widow.
Also Read: PF Withdrawal Rules
Calculating EPS Pension
The pension amount under EPS is calculated using a specific formula. The formula takes into account the pensionable salary and the pensionable service.
EPS Pension Formula
- Pensionable Salary: Average monthly salary of the last 60 months.
- Pensionable Service: Total number of years the employee has contributed to EPS.
Example Calculation
If an employee has a pensionable salary of ₹15,000 and a pensionable service of 30 years, the monthly pension would be:
EPS Pension Calculator
An EPS pension calculator is a helpful tool that can simplify this calculation. By entering details such as the average salary and years of service, employees can easily estimate their pension benefits.
How to Claim EPS Pension?
Claiming your Employee Pension Scheme (EPS) pension involves a systematic process to ensure that you receive your benefits without any issues.
Here are the steps to claim your EPS pension:
1. Meet Eligibility Criteria
- Superannuation Pension: Ensure you are 58 years old or have reached retirement age and have completed at least 10 years of service.
- Reduced Pension: If you are between 50 and 57 years old, you will be eligible for a reduced pension provided you have completed at least 10 years of service.
- Disablement Pension: In case of a total and permanent disability, you can claim this pension regardless of the length of service, provided you have contributed to EPS for at least one month.
2. Fill The Required Forms
- Form 10D: You must fill out this form completely and accurately to claim monthly pension benefits.
- Form 10C: If you are withdrawing the pension amount before completing 10 years of service, you will need to fill out this form for a withdrawal benefit or scheme certificate.
3. Gather Necessary Documents
- Bank Account Details: Provide a copy of a canceled cheque or the first page of your bank passbook, ensuring it has your name and account number.
- Proof of Age: Attach a self-attested copy of a valid ID proof that shows your date of birth, such as an Aadhaar card, passport, or birth certificate.
- Employer’s Attestation: Your employer must attest your form. This step is crucial as it verifies your employment details.
4. Submit the Forms and Documents
- Submission to EPFO: Submit the filled form along with the required documents to the EPFO office through your employer. If you are no longer employed, you can directly submit the forms to the EPFO office where your account is maintained.
5. EPFO Processing
- Verification: The submitted documents and forms will be verified by the EPFO office. They will check your service details and contributions to ensure you are eligible for a pension.
- Pension Calculation: They calculate your pension amount based on your pensionable salary and years of service.
6. Pension Sanction and Disbursement
- Sanction Order: Once verified, the EPFO will issue a sanction order. This order confirms your eligibility and the pension amount you will be receiving.
- Pension Disbursement: The EPFO will credit the pension monthly to the bank account you provide. Link your bank account with the EPFO to avoid any delays.
Benefits of the Employee Pension Scheme
EPS provides multiple benefits to employees and their families, ensuring financial security post-retirement.
Financial Security
EPS offers a stable income post-retirement, helping employees maintain their standard of living.
Family Pension
The scheme provides pension benefits to the employee’s family in case of the employee’s death, ensuring continued financial support.
Disability Pension
In case of permanent disability, EPS ensures that the employee receives a pension, regardless of the service period.
EPS and EPF: Understanding the Difference
Although the EPFO manages both EPS and EPF, they serve different purposes:
- EPF (Employee Provident Fund): A retirement savings scheme where both employer and employee contribute.
- EPS (Employee Pension Scheme): A pension scheme funded by the employer’s contribution to provide a monthly pension post-retirement.
Conclusion
The Employee Pension Scheme (EPS) is a critical component of the retirement planning process for employees in the organized sector in India. By understanding the eligibility criteria, types of pensions, calculation methods, and claiming process, employees can make informed decisions about their retirement.
EPS not only provides financial security post-retirement but also ensures continued support for the family in the event of the employee’s death or disability.
