Employee Pension Scheme(EPS)

The Employees’ Pension Scheme, or EPS, is a retirement plan that ensures monthly income for eligible salaried individuals after they attain the age of 58 years. Since EPS is part of the Employees’ Provident Fund (EPF) Scheme, individuals who are currently subscribed to the scheme are eligible for this pension scheme. This scheme came into effect on 16th November 1995 under Section 6A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

As per the current rule, employees contribute up to 12% of their basic salary into the EPF scheme and this is matched by the employer. Out of the employer’s contribution, 8.33% of the employer's contribution is earmarked for deposit into the EPS account. With regular EPS contribution and interest accrual till retirement, this pension scheme can help secure future finances by creating a significantly large post-retirement corpus.

The EPS is an effective way to strengthen your post-retirement life financially. However, to avail the benefits, you will be required to meet certain eligibility criteria. Key EPS eligibility criteria include:

• Membership: To avail the benefits of EPS, you need to be a member of the EPFO.
• Age: You need to be at least 50 years old to receive early pension under EPS and 58 years of age for a regular pension under this scheme.
• Service Tenure: At least 10 years of service is necessary to qualify for EPS. For the purposes of service tenure calculation, if you have worked for 6 months or more, your tenure is counted as one year. In case the working period is less than 6 months, it is not considered.

Apart from the above mentioned criteria, it is noteworthy that since only salaried individuals who are covered by the EPF can qualify for this scheme, self-employed individuals/professionals cannot avail the benefits of the Employees’ Pension Scheme.

The monthly pension that you can receive under EPS depends on two key factors- pensionable salary and your pensionable service. Based on these 2 factors, the formula to calculate EPS pension looks like this:

Monthly Pension = (Pensionable salary x Pensionable Service)/70

Now let’s see what pensionable salary and pensionable service means in the context of pension under EPS:

Currently there are 7 different types of pensions offered under the EPS in India. These include the following:

Superannuation Pension: This type of EPS pension can be availed if the individual has completed 10 years of service and has attained the age of 58 years.

Early Pension: This category of EPS pension can be availed if the individual has completed 10 years of service but has taken early retirement or ceased employment prior to attaining the age of 58 years.

Disablement Pension: As per current EPS rules, disablement pension is provided to an EPF subscriber who has suffered permanent and total disablement during his/her period of employment.

Widow and Child Pension: It ensures a monthly pension to the widow of the family until her death or remarriage. In case of multiple widows in a family, only the eldest widow will be eligible. If the EPF subscriber dies, his child, in addition to the widow pension, is eligible for EPS. The amount of child pension is 25% of the widow's pension and the child pension payouts happen until the child attains 25 years of age. Up to 2 children are eligible for child pension under EPS.

Orphan Pension: This type of EPS pension is provided to surviving children who have lost both parents and one of them was a EPF subscriber. The orphan pension payout is designed to help the surviving children manage their living and education expenses.

Nominee Pension: Nominee pension under EPS is provided to the nominated beneficiary of the EPF scheme subscriber in case there are no other surviving family members such as spouse or children. The nominee pension allows EPF subscribers to financially care for their loved ones even if they might not be a blood relation.

Surviving Parent Pension: This type of EPS pension is applicable if parent/parents of the deceased EPF subscriber are alive and there are no other family members.

There are various benefits that EPS provides to eligible individuals and key benefits of this pension scheme include the below:

• It provides financial stability after retirement as you get regular income post retirement
• It gives a pension to the person who has been disabled totally, even if the pensionable service is not completed.
• EPS ensures financial stability for the widow of the member by providing regular income to the spouse.
• Up to 2 surviving children also gets a pension under EPS in case of the unfortunate demise of the member.

Below are some key steps that one needs to complete in order to claim EPS pension:

• Log into the Unified Member Sewa Portal of EPFO using your UAN and password.
• Once logged in, go to the “Online Services” section and select Form 10D.
• Next verify your Bank Account for EPS pension payout
• In the next steps you will need to accept applicable terms and conditions, verify all family members and upload a copy of the passbook with your name and finally check all the details you have provided prior to submission of the request
• Verify your submission using Aadhaar OTP (ensure that your Aadhaar is linked to UAN and linked to a mobile number to receive the OTP). Once the OTP is entered, your application is submitted.

Next the EPFO will verify the application and if your EPS pension application is accepted, you will start receiving the pension in the bank account that was provided and verified.

The Employee Pension Scheme (EPS) is a great initiative by the Indian government to ensure that employees can enjoy their golden years after years of service. The EPS ensures financial stability of salaried individuals post-retirement as well as monetary support to the widow and/or child in the case of the unfortunate demise of the member.