Employees’ Pension Scheme (EPS), introduced in 1995 under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, is designed to provide pension benefits to employees in the organized sector after retirement, disablement, or to their dependents in case of death. This scheme is administered by the Employees’ Provident Fund Organization (EPFO).
Objectives
- Provide a pension to employees upon retirement.
- Offer pension benefits to the family of the employee in the event of their death.
- Extend benefits in case of permanent disablement.
Applicability
- The EPS applies to all employees who are members of the Employees’ Provident Fund (EPF).
- It covers employees working in establishments to which the EPF Act applies.
Contributions to the Pension Fund:
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Employer’s Contribution:
The employer contributes 8.33% of the employee’s basic salary plus Dearness Allowance (DA) to the Employees’ Pension Fund. This is out of the total 12% contribution made towards the EPF.
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Employee’s Contribution:
The employee does not make a separate contribution to the pension scheme. The entire 12% of the employee’s salary goes to the EPF.
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Government’s Contribution:
The Central Government contributes 1.16% of the employee’s basic salary plus DA towards the pension scheme.
Wage Ceiling
Contributions are calculated based on a statutory wage ceiling, which is currently set at Rs. 15,000 per month.
Eligibility for Pension:
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Retirement Pension:
An employee is eligible for pension benefits after attaining the age of 58 years. The employee must have rendered a minimum of 10 years of service.
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Early Pension:
Employees can opt for early pension at the age of 50, provided they have completed 10 years of service. However, the pension amount is reduced by 4% for each year the pension is taken before the age of 58.
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Disablement Pension:
If an employee becomes permanently and totally disabled, they are eligible for a pension irrespective of the length of service, provided the disablement is not due to willful neglect.
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Family Pension:
In case of the employee’s death, the family (spouse and children) is eligible for pension benefits, provided the employee has completed one month of service.
Types of Pension Benefits:
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Monthly Pension:
The monthly pension amount is calculated based on the employee’s pensionable salary and pensionable service.
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Family Pension:
The spouse of the deceased member receives a monthly pension. Children are eligible for pension benefits until they reach the age of 25. If there are no spouse or children, the dependent parents of the deceased member are eligible for the pension.
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Disablement Pension:
Employees who become permanently disabled receive a monthly pension for life.
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Withdrawal Benefit:
If an employee leaves service before completing 10 years of service, they can withdraw the accumulated pension fund.
Pension Calculation
Monthly Pension = (Pensionable Salary × Pensionable Service) / 70
- Pensionable Salary: Average salary of the last 60 months of service.
- Pensionable Service: Total years of service in the EPS.
EPFO Role
EPFO is responsible for the administration and management of the EPS. It ensures the collection of contributions, maintenance of accounts, and disbursement of pension benefits.
Claim Process
Employees can apply for pension benefits through the EPFO by submitting the necessary forms and documents. Upon verification, the EPFO processes the claim and starts disbursing the pension.
