What is the Employee Pension Scheme

What is the Employee Pension Scheme (EPS)?

Your CTC is not your salary. It’s made up of many different components, one of which is your pension. While a portion of our earnings is consistently diverted to this account, we hardly know how it functions. The Employee Pension Scheme (EPS) occupies a big pie of the savings in most households. That being the case, it is crucial that you understand how to use it.

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What is the EPS?

The Employee Pension Scheme (EPS) is a social security scheme managed by the Employees’ Provident Fund Organization (EPFO) in India. It’s designed to provide financial security to employees during their retirement years.

How does Employee Pension Scheme work?

EPS is a mandatory scheme for employees covered under the Employees’ Provident Fund (EPF) Act 1952. When an employee contributes to the EPF, a portion of that contribution is also allocated to the EPS.

Key Features of EPS:

• Pension upon retirement, disablement, or death: This pension is based on the employee’s length of service and average salary.
• Minimum pension amount: Currently set at 1,000 rupees per month for eligible employees.
• Benefits for family members: In case of the employee’s demise.
• Reduced pension for early retirement: For employees who opt for early retirement.

Eligibility Criteria for EPS:

• The person should be a member of the Employees’ Provident Fund Organization (though not continuously).
• The person should hold a minimum service period of 10 years.
• In case you have failed to avail of the benefits by the age of 58, you will be allowed to avail of the pension at an additional rate of 4% per year.

Calculating EPS Pension:

Pensionable Salary: The average of the last 12 months’ salary the individual received.

Pensionable Service: The duration during which the employee serves or works. If an employee withdraws the entire corpus before fulfilling the minimum 10-year period, he will have to restart the whole process. If an employee has completed 20 years of service, 2 years will be added to his serviceable period (20+2) as a reward. For pension calculation, the bar is set as 6 months.

Monthly EPS pension receivable calculation:

(Annual pensionable salary * Assumed pensionable service year) / 70

Example:

If your annual pensionable salary is 29,918 and your assumed pensionable service year is 15 years, then your monthly EPS pension receivable would be:

(29,918 * 15) / 70 = 6,426 rupees

Conclusion

The Employee Pension Scheme is a crucial aspect of employee benefits, providing financial security and peace of mind during retirement. It’s important to understand how the scheme works and how your pension is calculated to ensure a comfortable retirement.

Frequently Asked Questions (FAQs): Employee Pension Scheme (EPS)

What is the Employee Pension Scheme (EPS)?

The Employee Pension Scheme (EPS) is a social security initiative managed by the Employees’ Provident Fund Organization (EPFO) in India. It provides financial security to employees post-retirement, as well as benefits in cases of disablement or death.

How is the EPS different from the Employees’ Provident Fund (EPF)?

While both EPS and EPF are managed by the EPFO, they serve different purposes:

• EPF: Focuses on retirement savings, where both the employer and employee contribute.
• EPS: Provides a pension benefit funded by the employer’s EPF contribution.

Who is eligible for the Employee Pension Scheme?

To qualify for EPS benefits:

• You must be a member of the EPFO.
• You need at least 10 years of continuous or non-continuous service.
• Benefits are available at 58 years, with an option for early pension at 50 years (at a reduced rate).

What is the Pensionable Salary under EPS?

Pensionable Salary is the average of the last 12 months’ salary before leaving the job or retirement. The maximum salary considered is ₹15,000 per month.

Can I withdraw my EPS funds before completing 10 years of service?

Yes, if you have less than 10 years of service and decide to withdraw, you will receive a lump sum based on your contributions and service period. However, this will forfeit your pension eligibility.

What happens if I don’t claim my EPS pension at 58 years?

You can still claim your pension later. For every delayed year (after 58), you will earn an additional 4% on your pension amount.

Are there family benefits under the EPS?

Yes, EPS offers financial security to family members:

• Spouse Pension: Lifetime pension for the spouse upon the member’s death.
• Children Pension: Up to two children receive 25% of the monthly pension until they turn 25.

Is it possible to receive a higher pension under EPS?

Higher pensions are possible if:

• Your employer contributes to EPS based on your actual salary (not capped at ₹15,000).
• You opt for the joint declaration for higher contributions with your employer.

Can I transfer my EPS account when I switch jobs?

Yes, your EPS account is linked to your Universal Account Number (UAN). Contributions and service years automatically transfer when you switch jobs.

What is the minimum pension amount under EPS?

Currently, the minimum pension amount is ₹1,000 per month for eligible employees.

Can I nominate someone for my EPS benefits?

Yes, you can nominate family members (spouse or children). If no family members exist, you can nominate someone else for the benefits.

What are common misconceptions about EPS?

• Misconception: EPS is part of your salary.
  • Fact: EPS is funded by the employer’s EPF contribution, not the employee’s.
• Misconception: The pension amount is substantial for all.
  • Fact: The pension depends on service years and capped contributions, so it might be lower than expected.

How can I check my EPS balance and service years?

You can log into the EPFO portal or use the EPFO mobile app to view your EPS balance and service details.

What steps should I take to claim my EPS pension?

1. Submit Form 10D through your employer or online via the EPFO portal.
2. Ensure your bank account, Aadhaar, and other KYC details are updated.

Can I access EPS benefits if I live abroad after retirement?

Yes, you can claim EPS benefits if you are eligible, even if you reside outside India. Ensure your KYC details are complete.

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