The Ministry of Labour and Employment has amended the Employees' Pension Scheme, 1995 by allowing restoration of normal pension in cases of commutation.
If you are a pensioner and had availed the benefit of commutation, there’s a piece of good news for you. A recent move by the government will help EPSpensioners to get normal pension even after getting a reduced pension due to commutation. The government has notified through a recent gazette notification that the normal or full pension will be restored for those pensioners who had availed commutation on or before September 25, 2008. Such a full pension after commutation will get restored after completion of 15 years for those pensioners.
The restoration of full pension after commutation will benefit nearly 6.3 lakh pensioners in their retirement. The ministry of labour and employment in a gazette notification on Feb 20th has amended the Employees’Pension Scheme, 1995 by allowing restoration of normal pension and introduced the Employees’ Pension (Amendment) Scheme, 2020.
In the Employees’Pension Scheme, 1995, a new paragraph as follows is being inserted -“ Restoration to normal pension in cases of grant of commutation –The normal pension in respect of those members who availed the benefit of commutation of pension under the erstwhile paragraph 12Aof this Scheme, on or before the 25th day of September 2008, shall be restored after completion of fifteen years from the date of such commutation.”
On retirement, if the employee opts for commutation of pension, a portion is paid as a lump sum based on the commutation factor while on the balance the pension begins. In simple terms, commutation means a lump sum payment in lieu of periodic payments of pension. In such a case, the amount of pension will be lower than the amount of pension without any commutation. The amendment seeks to restore the original amount of pension as per the commutation table, after 15 years equal to the same amount as it would have been without commutation.
In the EPS 1995 scheme, an employee does not contribute directly. While 12 per cent of the employee’s basic salary goes directly towards EPF, 8.33 per cent of the employer’s share ( out of 12 per cent of employer share) goes into the employee’s EPS 95 scheme. For those whose pensionable salary is capped at Rs 15,000 a month, the amount that goes into EPS 95 is capped at Rs 1250 a month.
An employee can withdraw the amount that was diverted to EPS anytime on leaving the job but only before completion of 10 years. Else, the employee gets a lifetime pension only if he or she is a member of EPS95 for at least ten continuous years of service. From the age of 58, the pensioner starts getting pension after submitting Form 10-D to the Employees’Provident Fund Organisation( EPFO).