Employees’ Pension Scheme (EPS)

Thursday, August 24th, 2017 Amritesh 10 responses 445 Views

Employees Pension Scheme (EPS) was initiated for the welfare of the Employees post Retirement and provides them with Social Security. In 1971 Central Government launched the Employees’ Family Pension Scheme for providing Family Pension and Life Assurance Benefit to the employees’ which was later merged with the Employees’ Pension Scheme,1995 and Employees’ Deposit Linked Insurance Scheme,1976 for providing benefits to the employees.

From 1st September, 2014 few amendments have been made to Employees’ Pension Scheme and we will look at those in this post along with some of the important aspects of the scheme. Few changes made recently to Employees Pension Scheme have also been incorporated.

Benefits Under Employees’ Pension Scheme (Series-2)

Employees’ Pension Scheme (Series-3): Calculation of Pension

Employees’ Pension Scheme (EPS): Increase Your Pension with Deferred Withdrawal

Applicability

Any organization, factory, establishment registered under Employees’ Provident Fund regulation is also covered under Employees’ Pension Fund (EPS).

Subscribers to Employees’ Provident Fund (EPF) by default become member of the Employees’ Pension Fund Scheme (EPS).

Administrative Authority

The Act is administered by the Central and State Government in their respective spheres.

Employees Coverage (Amended Sep,2014)

Every Employee, including the ones employed through a contractor, who is in receipt of wages/salary up to Rs 15,000 p.m shall be eligible to become a member of the Scheme. Earlier the wage ceiling was Rs 6,500/-.

Employees’ who are earning more than Rs 6,500/ pm- but less than Rs 15,000/- pm is now mandatorily covered under the EPS.

However, New Employees’ who are earning more than Rs 15,000/- pm can no longer contribute and be a member of EPS.

Note: August, 2014 circular has been set aside the Supreme Court on 1st April, 2019. Clarification on the same from the EPFO is awaited.

Contribution

Only the employer’s contribution goes to the Employees’ Pension Scheme. The rate of contribution is 8.33% of the Salary/Wages (Basic + Dearness Allowance) subject to the maximum Wage Ceiling of Rs 15,000/- pm.

It means any individual who has a Salary/Wage of Rs 10,000/- per month then his/her contribution will be based on that amount only.

However, if any individual is an existing member of the EPS and draws a salary/wage in excess of Rs 15,000/- pm then his/her contribution to EPS will be in respect of Rs 15,000/- only. The excess deduction will be directed to the respective EPF account.

The maximum contribution to the EPS in a month is Rs 1250/- (8.33% of Rs 15,000/-) earlier it was Rs 541/- (8.33% of Rs 6500).

Central Government’s Contribution to Pension Fund

Central Government also contributes @1.16% (Rs 174 max) of the Wages/Salary of the EPS members but subject to the wage ceiling of Rs 15,000/- per month.

In case of members with salary in excess of Rs 15,000/- government will not make any contribution on the excess and the Member has to make a similar contribution on his own in order to avail the benefits of EPS.

Commencement of Pension

Unless otherwise expressly stated, the monthly member’s pension shall be payable from the date immediately following the completion of 58 years of age, whether the member has retired or ceased to be in employment before that date. However, Individual may opt for early pension between the age of 50-57 years but the pension will be reduced by 4% for the number of years falling short of 58 years.

Latest Amendment, provides a provision to the Employee to defer his/her pension up to the age of 60 years with or without contribution. Deferment of pension will earn an additional interest of 4% for each year respectively.

Pensionable Service

It means the service rendered by member for which contributions have been received or receivable in Employees’ Pension Fund.

In case of member who superannuates on attaining the age of 58 years, and /or who has rendered pensionable service of 20 years or more, his pensionable service shall be increased by adding a weightage of 2 years. Maximum Pensionable Service is 35 years.

Contributory Service

It is the period of actual service for which the contribution to the fund has been received. The balance of actual service shall be non contributing service.

Pensionable Salary

It means average monthly pay drawn in any manner, during the 60 months preceding the date of cessation of membership in the Pension Fund.

Eligibility for Pension

On Superannuation: Attains the Age of 58 years or more.

He/She has completed at least 10 years of Service.

Before Superannuation: Age between 50 years and 58 years.

He/She has completed at least 10 years of Service.

Death of a Member:  Nominee will be entitled to Pension

Individual is also eligible for Pension if he/she suffers from any Permanent Disability.

Minimum Monthly Pension

Employees’ eligible for pension under the Employee’ Pension Scheme (EPS) will get a minimum pension of Rs 1,000/- per month.

Nomination

Nomination form is common for both Employees’ Pension Fund as well as Employees’ Provident Fund.

I will take up calculation of Employees’ Pension and Benefits in my next post.

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Amritesh is an experienced professional in the field of HR, Finance and Compliance. He is currently working in the IT Industry with an US based firm. He took up Blogging as a hobby which eventually turned into passion. He primarily focuses on topics related to Personal Finance, HR, Compliance and Technology.

All the opinions/suggestions/views expressed on this blog are just for sharing information. Readers are requested to consult their respective financial advisers and experts before taking any decision. Views shared through post or comments are personal opinion meant for reference of the readers. These should not be considered as Investment Advice or Legal Opinion. The Blog or the Author does not take any responsibility regarding any such action taken by any Individual.
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Ajit
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Ajit

Can you tell me How Employees’ Pension Scheme(part of EPF ) affects when somebody change his job. ?

Madhav Kadival
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Madhav Kadival

Dear Sir,
I attain the age of 58 years on 31.03.2018 after putting a service of 32 years.
I want defer Pension for 2 years with Contribution.
Please let me know if I have to simply make an application or there is a prescribed format.

Selvan
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Selvan

Why they are dividing salary x service by 70

Alisa
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Alisa

Hi there! Such a wonderful article, thanks!

Rakesh
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Rakesh

I am working in private sector my monthly salary is 25 k. I am covered under EPFO and the pension scheme EPS I think, as rs 900 goes in to pension account as per my salary slip. Could you please let me know that I can get benefits from Atal pension yojna as we. As I have opened an account for APY and paying 529 per month.

P.G.Reddy
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P.G.Reddy

Sir, Please clarify the following. The pension calculated by EPFO personnel, under EPS ’95 scheme in 2 spells i.e. 1. On pensionable service upto 31.08.2014 on Rs.6,500/-. 2. On pensionable service from 01.09.2014 on Rs.15,000/-. Also on the weightage period of 2 years for who completes 20+ years of service, they are calculating the pension on Rs.6,500/-. This method looks wrong and it is drastically reducing the pension amount. As per the EPS ’95 system the pensionable salary is the average 60 months salary drawn by an employee preceding to the date of his retirement. Thus the pension is to… Read more »