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The Employees’ Pension Scheme (EPS) provides monthly pensions to eligible organized sector employees after retirement or disability. Pension amount depends on service years and average salary
According to the Employees’ Pension Scheme, members qualify for a pension after completing 10 years of contributory membership and reaching 58 years of age. (News18 Bangla)
The Employees’ Provident Fund Organisation (EPFO) manages the Employees’ Pension Scheme (EPS) for its members. Under this scheme, EPFO members receive a monthly pension after a certain period based on their service period and salary.
The Employees’ Pension Scheme (EPS) was initiated by the EPFO on November 16, 1995, replacing the Employees’ Family Pension Scheme 1971.
In the previous family pension scheme, the family received a pension only after the member’s death. The Employees’ Pension Scheme, however, provides for pension payments to both EPFO members and their families or nominees. Launched in November 1995, this scheme aims to provide regular income to organised sector employees after retirement.
Eligibility for the Employee Pension Scheme
To receive an EPS pension, EPFO members must fulfil certain conditions: a minimum of 10 years of service, reaching the age of 58, being a registered EPFO member, and contributing regularly to the EPS scheme throughout their employment.
Upon starting employment in a company or an organised sector organisation, individuals automatically become EPFO members. This entails a monthly deduction from their salary, deposited into both EPF and EPS accounts. These funds secure the EPFO member’s future, providing a pension after retirement or financial assistance during emergencies.
EPF members contribute 12% of their basic salary to the Employees’ Provident Fund (EPF) during their service, matched by an equal contribution from their employer. The company’s contribution is divided into two parts: 8.33% deposited into EPS and 3.67% into EPF.
Pension Eligibility for EPFO Members
According to the Employees’ Pension Scheme, members qualify for a pension after completing 10 years of contributory membership and reaching 58 years of age. They can draw this pension even while working, regardless of whether they retire from their organisation. Additionally, members leaving their job after 50 years of age are eligible to draw a reduced pension, provided they have completed at least 10 years of membership.
Key Features of the Employees’ Pension Scheme
- Minimum service period for pension: 10 years
- Pension commencement age: 58 years
- Minimum monthly pension: Rs 1,000
- Maximum monthly pension: Rs 7,500
In 2014, the central government set the minimum pension under EPS-1995 at Rs 1,000 per month. However, there are demands to increase this minimum to at least Rs 7,500 per month.
Pension Calculator
Pension calculation is based on the member’s pensionable service, considering the number of years they contributed to the pension fund and the average salary of the 60 months preceding retirement.
To calculate your estimated pension, visit the official EPFO website: www.epfindia.gov.in. Navigate to the ‘Online Services’ section and click on the ‘EDLI and Pension Calculator’ option. On the new screen, refer to ‘How to use EDLI and Pension Calculator’ for guidance. Click on the ‘EDLI and Pension Calculator’ option on the left to return to the home page. Select the ‘Pension Calculator’ tab to access the calculator. Input your details to calculate your pension.
EPS Pension Calculation Formula
Monthly pension = (Pensionable salary × Pensionable service) / 70
Pensionable salary: Average salary of the last 60 months (maximum Rs 15,000) Pensionable service: Total years of service contributed to EPS
For instance, an employee with a pensionable salary of Rs 15,000 and 10 years of service would receive a monthly pension of:
Monthly pension = (15,000 × 10) / 70 = Rs 2,143
This example demonstrates that even with the minimum service period of 10 years, an employee can receive a pension. However, a longer service period results in a higher monthly pension amount.
Types of Pensions Under the EPS Scheme
While pensions are generally paid to EPFO members upon reaching 58 years of age, the EPS scheme offers various types of pensions:
- Superannuation or Retirement Pension: Granted to EPFO members with 10 years of contributing membership upon reaching 58 years of age. This pension continues even after 58 years of service.
- Early Pension: Available to EPFO members who leave service after becoming contributing members and do not work in any institution covered under the EPF Act. This pension is offered at a reduced rate after completing 50 years of age and before 58 years. The member becomes eligible for the full pension amount only after turning 58.
- Disability Pension: Provided to members who leave service due to disability. This pension does not require a minimum contribution period; even a single month’s contribution suffices.
- Widow’s Pension and Child Pension: In the unfortunate event of an EPFO member’s death during service, their widow receives this pension for life. Their two children receive the pension until 25 years of age. If there are more than two children, the eldest two children below 25 years of age receive the pension. Upon the eldest child turning 25, their pension ceases, and the third child’s pension begins. This sequence applies to subsequent children as well. This benefit requires a minimum of one month’s contribution from the member. A totally disabled child continues to receive the pension for their lifetime.
- Orphan Pension: If the member passes away, leaving behind only children, the children receive this pension until 25 years of age. If there are more than two children, the third child becomes eligible for the pension benefit for 25 years after the eldest child turns 25.
- Nominee Pension: If a member nominates a beneficiary through e-nomination, that person receives the pension upon the member’s death. This option is available only if the member has no surviving family members, meaning a spouse or children.
- Dependent Father’s or Mother’s Pension: This pension is granted to the member’s dependent father if the member is unmarried at the time of death and has not nominated any beneficiary. If the father is deceased, the mother receives the pension.
To claim a pension, the claimant (EPFO member, family member, or nominee in case of the member’s death) needs to fill out online form 10D. Notably, members with 20 years or more of pensionable service receive a bonus of 2 years.
Members can choose to defer their pension after 58 years, up to the age of 60. This deferral results in a 4% increase at age 59 and an 8% increase at age 60. Members who have completed 10 years of pensionable service and continue working after 58 years can contribute to the pension fund until 60 years of age. In this case, their service and salary after 58 years are also considered for pension calculation, potentially leading to a higher pension amount.
Benefits of EPS
The EPS scheme offers several significant benefits to its members:
- Lifetime Income: Provides a steady stream of income through a monthly pension after retirement.
- Family Protection: In the event of the member’s death, the scheme ensures the family’s financial security by providing pension benefits.
- Disability Cover: Offers financial support to members who become permanently disabled by granting them a pension.
- Tax Benefits: The pension received under EPS is exempt from income tax, making it an attractive savings and retirement planning option.