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  • Guide to Understanding the Employee Pension Scheme

    Guide to understanding the Employee Pension Scheme (EPS) 1995

    As per the latest changes in the Employee Pension Scheme that are effective since 1st September 2014, the EPF is distributed as 12% of the employee’s salary goes into the EPF account and 12% of the employer's salary is divided into 3.67% for EPF, 8.33% for EPS, 0.5% for EDLI 1.1% as EPF admin charges and 0.01% as EDLI Admin charges. The minimum pension under EPS is Rs 1000 and EPF is mandatory for those employees drawing a salary less than Rs 15,000 a month. EDLI cover for each employee has been raised from Rs 1.56 Lakh to Rs 3 Lakh

    Guide to understanding the Employee Pension Scheme (EPS) 1995

    • Employees are automatically enrolled into the EPS scheme only if they are members of the EPF scheme.
    • The central government also contributes to an employee’s EPS along with employer contribution of 8.33% of the salary. Central government contributes 1.16% of the employee’s salary but salary is considered as basic pay plus daily allowance and is taken as a maximum of Rs 6500
    • Contributions made to the EPS by the employee does not generate any interest.
    • Eligible service is calculated in intervals of 6 months. If an employee has had a service of more than 6 months it is rounded to the next year and less than 6 months is rounded to the previous year. For example if an employee has had a service of 18 years and 8 months, the service is considered as 19 months and if the employee has had a service of 18 years and 4 months, the service is considered as 18 years
    • Pension received is lifelong and passes on to spouse and two children upon the employee’s death
    • Employees can receive only pension from EPS and are eligible only after completion of 10 years of service and must have attained the age of 50 years for early pension and 58 years for regular pension

    Availing the Pension

    The employee pension under EPS is calculated for 2 categories. One is for those who joined prior to 15th November 1995 and one for those joining post this date. Upon completion of 10 years of service, a person is eligible for the scheme certificate and can claim pension upon attaining the age of 58 or 50. One can also withdraw the EPS amount as long as they have not completed 10 years of service. Upon withdrawal, the employee receives the employee and employer EPF contribution and the interest earned on this EPF. The number of years served under 10 are multiplied with a proportion of wages during exit

    The employee can avail pension through superannuation where he/she has completed 10 years of service, is above the age of 58 and can continue working but no fresh EPF contributions will be made. They can take early pension where they have finished 10 years of service, attained age of 50 to 58 and are not working, if the employee is unfit to perform the job due to total or permanent disability and/or in case of death of the employee during or after service. In cases of death, the pension will be paid to spouse and 2 children below the age of 25

    Who gets pension through EPS?

    All employees of organised sectors can avail pension, provided he or she contributes towards EPF. The Employee Pension Scheme or EPS is clubbed with the Employee Provident Fund (EPF). The Government has now raised the minimum pension amount in the EPS. A minimum of Rs.1,000 per month will now be granted as pension to employees of the organised sector. Earlier employees received a meagre pension of Rs.500, which made survival tough for the employees.

    What is the contribution for Employee Pension Scheme?

    12.5% of the basic salary plus dearness allowance of the employee goes towards EPF, according to PF rules. Given below are the contribution details from the employee and the employer towards EPF, EDLIS and EPS.

    Employee Social Security Scheme Employee Contribution Employer Contribution
    EPF (Employee Provident Fund) 12% 3.67%
    EPS (Employees’ Pension Scheme) Nil 8.33%
    EDLIS (Employees’ Deposit Linked Insurance) Nil 0.5%
    EDLIS administrative charges Nil 0.01%
    EPF administration charges Nil 1.1%

    How much pension will you get? – Calculation

    Calculation of your monthly pension is not as complicated as it may seem. 95% of employees with a pension account receive only Rs.1,250 per month. However, the calculation of pension for employees who were employed before 1995 and those employed after, is different.

    Monthly Pension Calculation (Employed after 16/11/1995)

    The pension amount for those employed after 16th November, 1995 is calculated as follows:

    Pension amount = (Pensionable salary * Service period)/70

    In order to calculate the monthly pension in this case, following points need to be kept in mind:

    • Pensionable salary is the average income of preceding 60 months. Most employers have a restriction on pension contribution to either Rs.1,250 or 8.33%, whichever is minimum. In these scenarios, the maximum pensionable salary would be Rs.15,000.
    • Only the basic pay and dearness allowance is considered as salary.
    • If an employee has completed over 20 years of service, then two years should be added as bonus in the equation. According to the rules, the bonus can be also applied for the service before 16/11/1995.
    • The new rules make it mandatory for the pension to be more than Rs.1,000 per month.
    • An employee is eligible for pension after completion of 10 years of service.

    Monthly Pension Calculation (Employed before 16/11/1995)

    For employees who got jobs before 16th of November, 1995, the calculation of pension is a little complicated. The pension is calculated in two parts. Pension is calculated twice based on the period of employment. Once before 16/11/1995 and once after 16/11/1995. For calculation of pension before 16/11/1995, the following table can be used. In this table, pension is fixed based on the pay and period of service.

    Years of past service Up to Rs.2,500 (Salary) Above Rs.2,500 (Salary)
    Below 11 years 80 85
    Between 11 to 15 years 95 105
    Between 15 to 20 years 120 135
    More than 20 years 150 170

    Employees retiring after this date get an additional pension for the past period. The above pension amount is enhanced by 8% for each subsequent year.

    Claiming Pension Money

    If you have Scheme Certificate of Pension

    Once the employee crosses the age of 50, he or she is entitled to get pension by Scheme Certificate. The employee is required to fill Form 10-D to avail regular pension. If the employee has more than one Scheme Certificate, he or she can directly go to the EPF office. This requires attestation of the employee’s Form 10-D by the bank manager.

    If you don’t have Scheme Certificate of Pension

    In case an employee has not completed 9.5 years of service, you must claim a pension refund. In order to do, you have to fill Form 10-C along with EPF withdrawal form and submit it through your employer.

    Terms and conditions of EPS

    Some of the important terms and conditions of the Employees’ Pension Scheme are:

    • An employee must complete a minimum of 10 years in service in order to avail pension through EPS.
    • An employee can only avail pension after he or she turns 50 years old.
    • An employee cannot have more than one EPF account.
    • Government contribution towards EPS cannot be more than 1.16% of Rs.15,000. The maximum contribution from the government in a pension account is not more than Rs.174.
    • The provision for commutation of EPF pension is not available any more.

    Forms Related To Employees’ Pension Scheme (EPS)

    There are various forms that need to be submitted to avail different benefits under EPS. They are:

    Form name Filled by Benefit
    Form 10C Beneficiary or member
    • Withdrawal benefit
    • Scheme Certificate
    Form 10D Member
    • To avail pension after 58 years of age
    • To avail pension before 58 years but after turning 50
    • To avail disability pension
    Form 10D Nominee or widow/widower or Children
    • To avail nominee or dependant pension
    • To avail family pension
    • To avail children or orphan pension
    Life Certificate Pensioner
    • To be submitted by pension beneficiary or children every November
    • To be submitted to the manager of pension disbursing banks
    Non-remarriage Certificate Widower/widow
    • To be submitted by widower every year
    • To be submitted by widow at the beginning of pension
    • To be submitted to the manager of pension disbursing banks

    FAQ

    1. I am 54 years old and a member of the Family Pension Scheme. I have left my job on 13-12-93. I have already taken the withdrawal benefit. Am I eligible to join the new scheme now?
    2. Yes, you can join the new scheme, provided you refund the withdrawal benefit along with the interest. Thereafter, you will be entitled to receive pension after you turn 58 years old, if you complete a minimum of 10 years of contributory service by then.

    3. Can a 58 year old Family Pension Scheme Member who has retired on 15-01-94, avail pension under the new scheme?
    4. Yes, if he or she has retired after reaching the age of 58 years, and between 01-04-93 and 15-11-95, the employee may join the new scheme after returning the withdrawal benefit plus interest. The member is then entitled to pension immediately, starting from the date of exit provided he has completed 10 years of eligible service.

    5. Can a member of the Employees’ Pension Scheme change his or her nomination?
    6. Yes, a member of the EPS can change his or her nomination with the rules for such nomination. It simply means that the nominee should be a family member of the employee. Only if the employee has no family, then he or she can nominate anyone else according to their wish.

    7. Under the EPS, is employee the only beneficiary of the fund?
    8. Benefit of the EPS is paid to the employee and in his or her absence, to the family of the employee.

    9. Is it possible to receive pension earlier than the age of maturity of the EPS?
    10. Yes, you may receive pension on turning 50, however pension payable from that age will be reduced by 3% for every year falling short of 58.

    11. How many years of service should a member of EPS complete in service in order to be eligible for receiving pension?
    12. An employee is entitled to receive pension only after completion of minimum 10 years of eligible service.

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