EPS (Employee Pension Scheme)

The Employee Pension Scheme (EPS) ensures financial stability for employees post-retirement, providing lifelong pension benefits and social security.
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Employee Pension Scheme
OPEN FD
4 mins
29-January-2025

The Employee Pension Scheme (EPS), managed by the EPFO, is a retirement savings plan for employees in organised sectors. All EPF members are automatically enrolled in EPS. This scheme offers various EPS benefits, including pension payouts after retirement.

What is Employee Pension Scheme?

The Employee Pension Scheme 1995 (EPS 95) is a social security scheme introduced by the Employees’ Provident Fund Organisation (EPFO) on 19th November 1995.

Designed to provide financial support to employees after retirement, the EPFO administers the scheme and helps members aged 58 and above claim their pension.

Both new and existing EPF members can benefit from EPS 95. Both the employee and employer contribute 12% of the employee's basic salary and dearness allowance (DA) to the scheme.

The entire employee contribution goes to the EPF, while 8.33% of the employer's contribution is allocated to EPS, and the remaining 3.67% goes to the EPF.

While EPS ensures a steady pension post-retirement, you can further strengthen your financial future with a high-interest, risk-free investment option. Diversify your retirement savings and earn up to 8.85% p.a. returns with a Fixed Deposit. Book your FD now and enjoy assured returns!

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Responsibilities of employers

Employers have several key responsibilities regarding pension contributions under the Employees' Provident Fund (EPF) scheme:

  • Monthly contribution: Employers must contribute 8.33% of an employee's basic salary and dearness allowance to the Employees' Pension Fund within 15 days of the end of each month.
  • Government contribution: The Central Government also contributes 1.16% of an employee's pay to the Employees' Pension Fund.
  • Contractor employees: Employers are responsible for making contributions for all employees, including those working under contractors.
  • Disability benefits: If an employee becomes totally or permanently disabled during their service, the employer must contribute at least one month's basic EPS contribution to ensure eligibility for pension benefits.
  • Administrative costs: Employers are responsible for bearing all administrative costs associated with the EPF scheme.

Benefits of Employee Pension Scheme

The benefits of Employee Pension Scheme include financial security, a steady income post-retirement, and support for dependents. Discussed below are a few in detail:

  • Eligibility for pension benefits start when a member retires at the age of 58 years. A minimum service period of 10 years by the age of 58 is mandatory for availing pension benefits.
  • If a member can't complete 10 years of service before turning 58, they can withdraw the entire sum at the age of 58 years using Form 10C. Monthly pension benefits are not available in this case.
  • If an EPFO member becomes permanently disabled, they get a monthly pension, no matter their service period.
  • In case of the member's unfortunate demise, it offers pension benefits to the member's family, whether it happens before or after the pensionable service period.

However, to ensure a comfortable and financially secure retirement, it is advisable to supplement your pension with additional investments. Boost your retirement corpus with a high-interest FD. Get up to 8.85% p.a. with Bajaj Finance FD – Book your FD today and enjoy a stable financial future!

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How to calculate your pension under EPS

The pension amount depends on member’s pensionable salary and service duration. Here is the formula for calculating monthly pension income:

Member’s Monthly Pension = (Pensionable salary x Pensionable service)/70

1. Pensionable salary

Pensionable salary refers to the average monthly earnings in the last 60 months preceding the member's exit from the EPS.

In case of non-contributory periods within the last 60 months of employment, the non-contributory days won't be considered, and the corresponding benefits will be granted to the employee. For example, if someone starts a job on the 3rd of the month and assuming a person's salary is Rs. 15,000, the salary for 28 days would be Rs. 14,000 (Rs. 500 per day less for two days). However, the monthly salary considered for EPS would be for 30 days, i.e., Rs. 15,000.

The maximum pensionable salary is capped at Rs. 15,000 per month.

Given that the employer contributes 8.33% of this salary to the employee’s EPS account, the monthly deposit in the employee’s EPS account is:

Rs. 15000 x 8.33/100 = Rs. 1250

2. Pensionable Service

The pensionable service is referred to actual period of service for the member. Service periods across different employers are considered when calculating the pensionable service period. The employee must obtain the EPS Scheme certificate and submit it to the new employer whenever they switch jobs.

If a member withdraws the EPS amount before completing 10 years and joins another company, they must restart contributing to the EPS account, and the service period will be reset to zero.

The pensionable service period is assessed on a 6-month basis, with a minimum of 6 months. For instance, if the service period is 7 years and 3 months, the considered pensionable service is 7 years. However, if the service duration is 7 years and 11 months, the pensionable service period is considered as 8 years.

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Eligibility criteria applicable for EPS

  1. Individual must be an EPFO member.
  2. To get early pension, you should be at least 50 years old, and for regular pension, you need to be 58 years old.
  3. You must complete at least 10 years of service to avail benefits of EPS.

Additional read: Difference Between EPF and EPS

Types of pensions in the Employees’ Pension Scheme

The EPS 95 pension scheme offers various pensions, including those for widows, children, and orphans, providing support to the deceased member's family.

1. Child pension

Surviving children receive a child pension, in addition to the monthly widow pension, until they turn 25. The amount is 25% of the widow pension, and a maximum of two children can receive this benefit.

2. Widow pension

Widows are eligible for a pension under the Widow or Vridha pension, which continues until their death or remarriage. If there are more than one widow, the pension is payable to the eldest widow.

3. Reduced pension

If an EPFO member completes 10 years of service and is between 50 and 58 years old, they can opt for early pension. However, If the member is below 58 years of age, the pension amount is reduced by 4% for every year.

4. Orphan pension

If the member passes away without a surviving widow, the member's children can receive a monthly orphan pension, which is 75% of the monthly widow pension value. Up to 2 children can benefit from the orphan pension.

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Types of pensions forms under EPS in India

  1. Form 10C: Used for withdrawal funds before completing 10 years of service.
  2. Form 10D: Used for monthly pension withdrawal after reaching 50 years of age and for other pensions like monthly widow pension, child pension, etc.
  3. Non-remarriage certificate: It is used to declares that the widow/ widower has not remarried.

Also read: National Pension Scheme

Conclusion

Employee Pension Scheme (EPS) offers financial security to employees of the organised sector after retirement by providing them a guaranteed pension based on years of service and contributions. Understanding the eligibility criteria and the types of pensions available under EPS can help employees make informed decisions to secure their future.

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Frequently asked questions

Can I withdraw my EPS amount?

Yes, you can withdraw your EPS amount if you have completed 10 years of service or if you are retiring at the age of 58. Partial withdrawal is also possible under certain conditions, such as unemployment.

Can I receive both EPS pension and returns from a Fixed Deposit simultaneously?

Yes, you can receive your EPS pension while earning returns from a Fixed Deposit. While EPS provides a steady post-retirement income, investing in a high-interest FD can help you supplement your pension and ensure greater financial security. With Bajaj Finance FD, you can earn returns of up to 8.85% p.a., ensuring stable and risk-free growth for your savings. Book your FD today to build a stronger financial future!

Is EPS mandatory for all employees?

Yes, EPS is mandatory for all employees who are part of the Employees' Provident Fund (EPF) scheme and earn a monthly salary of up to ₹15,000. It provides pension benefits after retirement.

Who is eligible for the EPS scheme?

Employees who are members of the Employees’ Provident Fund (EPF) and have completed at least 10 years of service are eligible for the Employees’ Pension Scheme (EPS). The scheme is available to employees earning a basic salary of up to Rs. 15,000 per month and provides a pension after retirement at the age of 58 years.

Who is not eligible for EPS pension?

Employees who haven't completed 10 years of service or are currently employed are ineligible to withdraw EPS funds. You can only withdraw once you've left your current job.

How much EPS pension will I get?

The EPS pension amount depends on your last drawn salary, years of service, and the contribution made to the Employee Pension Scheme (EPS). The formula used is (Pensionable Salary × Service Years) / 70, with a minimum monthly pension of ₹1,000.

What is EPS 95 pension scheme?

The EPS 95 pension scheme, introduced in 1995, is a social security initiative under the EPFO that provides a monthly pension to eligible employees after retirement, disability, or death. It ensures financial stability for employees with a minimum service of 10 years.

What is EPS limit?

The EPS limit refers to the maximum pensionable salary considered for contributions. As per current rules, the salary cap is Rs. 15,000 per month, meaning contributions are calculated based on this limit, regardless of the actual salary earned by the employee.

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