The Employees’ Pension Scheme (EPS), run by the Employees’ Provident Fund Organisation (EPFO), is one of India’s largest social security programmes. Under this scheme, employees receive a monthly pension based on their service period and salary. Launched on November 16, 1995, the EPS is designed to provide regular income to organised sector employees after retirement.
Key features of EPS:
Minimum service period for pension eligibility: 10 years
Pension commencement age: 58 years
Minimum monthly pension: Rs 1,000
Maximum monthly pension: Rs 7,500
Eligibility criteria for EPS:
To be eligible for an EPS pension, an employee must meet certain criteria. Firstly, he or she must have completed a minimum of 10 years of service. Additionally, the employee must be at least 58 years old, as pensions under EPS commence at this age. The employee must also be a registered member of the EPFO and should have consistently contributed to the EPS scheme throughout their employment.
EPF members contribute 12% of their basic pay towards the provident fund regulated by the EPFO, with employers matching this contribution. The employer’s contribution is divided into two parts: 8.33% is allocated to the EPS, while 3.67% goes towards the EPF scheme.
Since 2014, the Centre has set the minimum pension under the EPS-1995 at Rs 1,000 per month. However, there have been long-standing demands to raise this pension to at least Rs 7,500 per month.
How much pension can an EPS member expect if they work for the mandatory 10 years required for EPS pension eligibility?
EPS Pension Calculation Formula:
The monthly pension is calculated using the following formula:
Monthly Pension = (Pensionable Salary × Pensionable Service) / 70
Pensionable Salary: The average of the last 60 months’ salary (maximum Rs 15,000)
Pensionable Service: Total years of service contributed to EPS.
For example, if an employee’s pensionable salary is Rs 15,000 and pensionable service is only 10 years, the monthly pension would be:
Monthly Pension = (Rs 15,000 × 10) / 70 = Rs 2,143
The example shows that even with the minimum service period of 10 years, an employee can still receive a pension, though higher service periods result in greater monthly payouts.
Types of EPS pension:
Superannuation Pension: On attaining the age of 58 years.
Early Pension: Between ages 50-58 (with deductions).
Widow Pension: For the spouse of a deceased member.
Child Pension: For children of a deceased member.
Orphan Pension: For children when both parents have passed away.
Disability Pension: In case of permanent disability.
Early Pension Option:
Employees who wish to take an early pension before the age of 58 can opt for this option under the EPS scheme, provided they meet the following conditions: they must be at least 50 years old and have completed a minimum of 10 years of service. However, it’s important to note that opting for an early pension will result in a deduction of 4% per year from the calculated pension amount, which will reduce the overall pension received.
To maximize your EPS pension, you should focus on a few key strategies. First, longer service directly impacts your pension, as the more years you work, the higher your pensionable service and pension amount. Second, a higher salary means a higher pensionable salary, which leads to a larger pension payout. Third, it’s essential to ensure regular contributions to the EPS scheme, as uninterrupted contributions will help accumulate a higher pension over time. Lastly, if eligible, you can opt for the Higher Pension Scheme, which allows you to enhance your monthly pension amount. By following these steps, you can secure a better financial future post-retirement.
How to check EPS pension?
You can check your EPS pension by visiting the EPFO portal or using the online services provided by EPFO.
EPS benefits:
The EPS offers several important benefits to its members. It provides a lifetime income, ensuring a guaranteed monthly pension after retirement. In case of a member’s death, the scheme offers family protection, allowing the family to receive pension benefits. EPS also includes disability cover, providing a pension in the event of permanent disability. Additionally, the tax benefits of EPS make it an attractive option, as the pension is exempt from income tax.