Employees' Provident Fund (EPF) members are eligible for a pension under the Employees' Pension Scheme (EPS), which is a part of the overall EPF framework. The EPS is managed by the Employees' Provident Fund Organisation (EPFO) and provides a pension to employees in the organized sector after their retirement.
Key Features of the Employees' Pension Scheme (EPS)
- Eligibility:
- An EPF member becomes eligible for pension benefits under EPS if they have completed at least 10 years of service and reach the age of 58 years.
- If an employee has not completed 10 years of service at the time of leaving the job, they can withdraw the EPS amount by applying for an EPS Scheme Certificate.
- Contribution:
- Out of the total EPF contribution (12% of basic salary + dearness allowance from both employee and employer), 8.33% of the employer’s contribution is diverted to EPS. The Government also contributes 1.16% of the employee’s salary (capped at a salary of ₹15,000 per month) to EPS.
- The contribution to EPS is calculated on a maximum salary of ₹15,000 per month, even if the actual salary is higher.
- Monthly Pension Calculation:
- The pension amount is calculated using the following formula:
-
- Pensionable Salary: This is the average of the employee's last 60 months' basic salary and dearness allowance.
- Pensionable Service: The total number of years an employee has contributed to the EPS. If the service is more than 20 years, an additional 2 years is added to the service duration.
- Types of Pensions:
- Superannuation Pension: Available upon reaching the age of 58 years and having at least 10 years of eligible service.
- Early Pension: Employees can opt for a reduced pension starting from the age of 50 if they have completed 10 years of service. The pension amount will be reduced by 4% for each year the pension is drawn earlier than 58 years.
- Disability Pension: If a member becomes permanently disabled while in service, they are entitled to a pension irrespective of the years of service.
- Widow Pension: Payable to the widow of the deceased member. The amount depends on the pensionable salary and length of service of the deceased member.
- Children Pension: Payable to the children of the deceased member, in addition to the widow pension, up to the age of 25.
- Orphan Pension: Payable to the orphans of the deceased member if both parents are deceased.
- Withdrawal of EPS Pension:
- If an EPF member has less than 10 years of service and leaves the job, they can withdraw the EPS amount by applying for a Scheme Certificate.
- After attaining the age of 58, the member can receive a monthly pension if they meet the eligibility criteria.
- Higher Pension Option:
- Recently, the Supreme Court of India allowed EPF members to opt for a higher pension under EPS, based on their actual salary rather than the salary cap of ₹15,000 per month. This option is available for employees who contributed to EPS before September 1, 2014, and meet specific conditions.
Conclusion
The pension for EPF members under EPS provides a social security safety net for employees in the organized sector in India. The benefits, however, are linked to the years of service and salary, and the pension amount is generally modest due to the contribution limits.
