On November 16, 1995, the Employee Pension Scheme went into effect. All employees of factories and other establishments covered by the 1952 Miscellaneous Provisions Act and Employees Provident Funds are covered by this scheme.

Employer Responsibilities

  • A portion of the monthly payments payable by the employer, equal to 8.33 percent of the employee’s wage (Basic+ Dearness Allowance), must be remitted by the employer to the Employees Pension Fund within 15 days of the end of each month.
  • The Central Government additionally contributes 1.16 percent of the pay of Employees Pension Scheme members and credits the payment to the Employees’ Pension Fund.
  • The primary employer is responsible for all employees who work for him directly or through a contractor.
  • If an employee becomes totally or permanently incapacitated while on the job, the employer must deposit monies in his basic EPS account for at least one month in order for the employee to be eligible for a pension.
  • The employer is responsible for all administrative costs.

Eligibility Criteria –

 To be eligible for pension benefits under the EPS 95 Pension Scheme, an employee must have worked for a minimum of ten years.

  • The retirement age is 58 years.
  • From the age of 50, members can withdraw their EPS at a reduced rate.
  • If an employee has less than ten years but more than six months of service, he or she might withdraw the EPS amount after being unemployed for more than two months.
  • If an employee becomes totally and permanently incapacitated, he or she is entitled to a monthly pension, which is payable for the rest of his or her life, regardless of whether or not he has served the pensionable service period. The member may, however, be required to undergo a medical examination to determine whether or not he is unsuited for the work he was doing prior to becoming incapacitated.
  • If a member dies while on active duty, his or her family becomes entitled for pension payments.

How to Calculate Pension Under Employee Pension Scheme

The amount of the PF pension is determined by the member’s pensionable pay and service.

  • Pensionable Salary

The pensionable wage is the average monthly income withdrawn by the member in the previous 12 months before departing the Employee Pension Scheme in India. If there are any non-contributory periods in the last 12 months of work, the non-contributory days in the month will not be taken into account, and the employee will receive the benefit of those days.

For example, if a person’s monthly income is Rs.15,000 and he starts on the 3rd of the month, his salary for that month will be Rs. 14,000 for 28 days (500 per day less for two days). However, the monthly EPS salary would be considered for 30 days, i.e. Rs. 15,000. As a result, the amount that must be put in the employee’s EPS account is 8.33 percent of 15000 = 1250. Every month, the maximum pensionable wage has been increased from Rs .6500 to Rs. 15,000

  • Pensionable Service

The actual service period of an employee or member is referred to as pensionable service. The pensionable Employment Period is computed by combining all of the member’s services with various employers. When an employee changes positions, he or she must submit the EPS Scheme certificate to the new employer.

Every time an employee changes jobs, he must obtain an EPS Scheme Certificate and present it to his new employer. It’s worth noting that after 20 years of service, the employee receives a two-year bonus.

Prior to the end of the ten-year service period, If a member withdraws the EPS corpus and joins another firm, he will have to start over when it comes to contributing to the basic EPS account, as the service term will be reset to zero at the start.

The pensionable service duration is calculated on a 6-month basis. The minimum term of pensionable service is six months. If the service time is 8 years and 2 months, the pensionable service period is considered to be 8 years. If the service period is 8 years and 10 months, the pensionable service period is regarded to be 9 years.

Types of Pensions under the Employees’ Pension Scheme

Under the EPS 95 pension program, there are various sorts of pensions available, including pensions for widows, children, and orphans, which help the pensioner’s family members.

1) Pension for Widows

The widow of a member is eligible for a pension under the Widow pension or Vridha pension. The pension amount will be paid until the widow’s death or remarriage. If there are multiple widows, the pension will be paid to the oldest widow.

2) Child Benefit

In the event that a family member dies, the surviving children are entitled to a child pension in addition to the monthly widow pension. The child will get a monthly stipend until he or she reaches the age of 25. The amount payable is 25% of the widow pension, and it can be split between up to two children.

3) Pension for orphans

If the member dies without a living widow, his children will be entitled to a monthly orphan pension of 75 percent of the value of the monthly widow pension. The orphan pension will benefit two surviving children from the oldest to the youngest.

4) Pension Reduction

If a member of the EPFO has completed ten years of service and is between the ages of 50 and 58, he is eligible for an early pension. In this scenario, the age is under 58 years. The pension amount is being reduced at a rate of 4% every year.

If a member chooses to withdraw his monthly reduced pension at the age of 54, he will get a sum equal to 84 percent (100 percent – 4 x4) of his original pension amount.

In India, there are various types of pension forms available under the EPS.

The following form must be completed by the member in order to receive the benefits of the employee pension scheme. Or the EPFO Member’s survivors.

EPS FormApplicantPurpose
Form 10CMember-Withdrawal before  completing ten years of service     -Certificate from the EPS Scheme
Form 10DMember-After 50 years of age, you can start withdrawing your pension on a monthly basis.     -Pensions for widows, children, and others are paid on a monthly basis.
Life CertificatePensioner/Guardian-The pensioner certifies that he or she is still alive by signing a paper.     -The paperwork must be presented to the bank manager every year in November when the pension account is operational.
Non- remarriage certificateWidow/widower-To certify that the widow or widower has not remarried     -Every year in November, it must be submitted.

Also, read

VPF: Advantages, Documents, Enrollment Process & Withdrawal
NPS vs PPF – Which Is A Better Choice for Investing?