What It Is?
EPS is operated by the Employees’ Provident Fund Organization or EPFO, the Employees Pension scheme aims to provide pension to the employees of the organized category. Employees who have continuous contributory membership of EPF for 10 years can be beneficiaries under this scheme.
Background of EPS
Who is Eligible to Obtain Benefits of EPS?
- He should be a member of EPFO
- He should have completed 10 years of service
- He has reached the age of 58
- He can also withdraw his EPS at a reduced rate from the age of 50 years
How to Calculate your Pension Amount?
The monthly pension amount under the Employees Pension Scheme is decided based on the pensionable salary and the pensionable service period of the member employee.
Monthly EPS pension = Pensionable salary (annual) * (Pensionable Service (in years) / 70)
Pensionable salary is the average monthly salary in the last 12 months before the member exits the organization
If there are non-contributory periods in the last 12 months of the employment, the non-contributory days in the month will not be considered and the benefit of those days would be given to the employee.
If the salary of the person is ₹ 15,000, the salary for the person would be ₹ 14,000 for 28 days ( ₹ 500 per day less for two days). However, the monthly salary considered for EPS would be for 30 days, i.e. ₹ 15,000
The Most important Point is – The maximum pensionable salary is limited to ₹ 15,000 every month.
This means Maximum 8.33% of 15,000 is Rs. 1250 Per month can be deposited in EPS by EPFO.
The actual service period of the member is considered as the pensionable service. Service periods under different employers are added at the time of calculating the pensionable service period. The employee has to get the EPS Scheme Certificate issued and submit it to the new employer every time he switches a job.
It is very nice to hear that the employee gets a bonus of 2 years after completing 20 years of service.
If the member withdraws the EPS corpus before completing the service period of 10 years and joins another company, Then he will have to start fresh for contributing to the EPS account and the service period will also be set as zero at the start.
The pensionable service period is considered on a 6 months basis. The minimum pensionable service period is 6 months. If the service period is 18 years 2 months, the pensionable service period considered is 18 years. However, if the service duration is 18 years and 10 months, the pensionable service period is taken as 19 years.
Where to Check EPS Amount
A member can check the amount accumulated in his Employees’ Pension Scheme (EPS) account in his EPF Passbook. The last column in the passbook shows the EPS contribution deposited by the employer every month in the account of the member.
Key Points to remember about EPF Pension
- All contributions made in the Employees’ Pension Scheme (EPS) account are to be done by the employer
- The employer makes a contribution of 8.33% of the employee’s pay for EPS (Max 1250 per month)
- The employee’s pay consists of basic wages with dearness allowance, retaining allowance and admissible cash value of food concessions
- All applicable contribution cost has to be borne by the employer
- The minimum service period is 10 years to be eligible for availing pension benefits
- As per the scheme, the retirement age of the person is fixed at 58 years of age
- One can also defer his pension for two years (up to 60 years of age) after which he will get a pension at an additional rate of 4% for each year.