Employee Pension Scheme: A Smart approach to Retirement Planning

In today’s economically demanding world, retirement planning has assumed renewed significance. Employees spend most of their middle age and youth at work, so an efficient scheme to ensure adequate funds during their retirement is important.

In 1995, the Indian Government introduced the Employee Pension Scheme (EPS) to create financial security for employees after retirement. EPS ensures that individuals receive a steady pension income in their retirement years. 

This article will provide a detailed guide on EPS, including its definition, advantages, features, and eligibility criteria. It will also explain how to calculate, check, and withdraw EPS amounts.

What is EPS? 

The Employee Pension Scheme (EPS) is a social security scheme introduced on 16th November 1995. The scheme is managed by the Employee Provident Fund Organisation (EPFO) to ensure a regular income for employees post-retirement. The EPS 95 scheme automatically includes all new and old members of the employee provident fund (EPF). An employee has the option to become part of this scheme from April 1st 993. 

Key Features of the Employee Pension Scheme

The Employee Pension Scheme (EPS) is a social security scheme introduced and administered by the Employee Provident Fund Organisation (EPFO). This ensures a regular income for employees post-retirement. 

• An employer contributes 12% of the employee’s basic salary to EPF, of which 8.33% is for EPS and 3.67% for EPF.
• The employer shall pay his contribution for every calendar month before the 15th of the month.
• The central government pays 1.16% of the EPS amount every month.
• An EPS account holder will receive at least ₹1,000 as their monthly pension amount.

Types of Employee Pension Scheme

There are different types of pension under the Employee Pension Scheme. 

1. Orphan Pension

If an employee dies without leaving a spouse behind, 75% of the employee’s monthly pension shall be divided between any of his/her two children.

2. Widow/Widower Pension 

If the employee dies but is survived by a spouse, the widow/widower is entitled to a monthly pension until she/he remarries.

3. Child Pension

• If the widow/widower remarries, the children (classified as orphans) will receive the pension amount until they are 25 years old.
• If the child is disabled, he or she will receive the pension amount until his/her death.

4. Reduced Pension

• Individuals are entitled to a reduced pension at 50 years, provided they have completed 10 years of service.
• If an individual is below 58 years old, the amount is reduced by 4% yearly.

Components of Your Employee Pension Scheme Amount

The pensionable salary and pensionable service determine who is eligible for the Employee Pension Plan.

1. Pensionable Salary

It is the average monthly salary of an employee for the last five years before exiting the Employee Pension Scheme. The maximum pensionable salary is fixed at ₹15,000/month even if one’s basic salary is higher.

2. Pensionable Service 

The pensionable service is the actual service period of the employee and is assessed on a six-month basis.

• All service periods with various employers are aggregated to compute the pensionable service.
• If the worker completes six months or more, it counts as one year of service tenure. Service tenure of less than six months is not considered. For instance, when an employee’s service is four years and two months, the pensionable service is taken as four years, while it is five years if the employee works for four years and seven months.
• Employees can get a bonus of two years after 20 years of service.

Formula to Calculate the Employee Pension Scheme Amount

The formula to calculate pension is:

Employee Pension Scheme = (Service Period x Pensionable Salary)/70

Eligibility Criteria to Avail the Employee Pension Scheme

You should satisfy three major criteria for receiving pension benefits under the Employee Pension Scheme in India.

1. Individuals should be a member of the EPFO. One can become an EPFO member if their company has 20+ employees. 

2. One must should complete 10 years of employment.

3. Individuals must be 50 years old for early pension and 58 years for regular pension.

4. One can also choose to defer the age of their pension commencement to 60 years. In this case, they get an EPS pension at an annual rate of 4%.

How to Check Employee Pension Scheme? 

Employee can check their employee pension scheme amount using their verified universal account number (UAN) on the EPFO website. 

Here’s a step-by-step guide for the same:

1. Log in to the EPFO portal. Under the “Our Services” tab, select the “For Employees” option. 
2. Use the UAN in the Member Passbook option and log in. 
3. Click on your respective member ID to check your consolidated pension amount under the “Pension Contribution” column. 

Summing Up 

The Employee Pension Scheme in India remains a vital aspect of financial security for millions of employees in the organized sector. EPS provides a guaranteed pension upon retirement, reducing dependence on family in old age.

However, individuals can choose PowerUp Money to enhance their knowledge and make an informed decision about the best retirement scheme.

This app is designed for strategising wealth building, retirement planning, and mutual fund investments. Download the app now to become an expert in handling your finances and make your employee pension scheme amount more rewarding. 

FAQs

1. How and where can I find my employee pension scheme number? 

The Employee Pension Scheme ID and the Employee Provident Fund (EPF) ID are the same. You can find the EPS ID from the Universal Account Number (UAN) portal/UMANG app or your pay slip. You can check your EPF ID through your organisation’s HR department or visit your nearest PF office. 

2. What are the different types of employee pension scheme forms available? 

Form 10D is for families to claim the pension benefits of a deceased employee. Form 10Cis used by employees with over 10 years of experience to withdraw EPS funds. Form 20 can be used for EPS nomination, while Form 10 is useful for calculating pensionable service.

3. What will happen to my employee pension scheme fund if I change jobs? 

You cannot transfer your pension amount to your new employer because only the employer contributes to the Employee Pension Scheme. Your subsequent employer’s pension scheme amount will be reflected as separate entries under your member ID. 

However, the amount will not be lost as it is linked to your UAN. In line with governmental regulations, it will continue to attract interest. 

4. In what scenarios can I withdraw my employee pension amount? 

By default, you can withdraw your entire pension amount on retirement (at 58 years). You can withdraw the employee pension amount if you have been unemployed for more than two months (with a minimum of 6 months but less than 10 years of experience). You are eligible for a pension if you become permanently disabled. Your family receives your pension amount in case of your untimely death.

Disclaimer: The information provided is for informational purposes only. PowerUp is not responsible for any errors, omissions, or outcomes related to the use of this information.