Understanding Pension Scheme Eligibility and Withdrawal: How Can Employees Access Their Benefits?

Pension Scheme Eligibility and Procedure

I'm Sai, with 4 years of HR experience. I am presently working as an Executive HR in one of the leading Pharma Companies. Recently, one of my employees asked me about the benefits of the Pension Scheme as he has been working here for the past 11 years. My query is, I know that once a person completes 10 years of service without any breaks, they are eligible for the pension scheme. What is the procedure for that? How does he have to approach to avail of this scheme?

After resigning, does he/she have the chance to withdraw the provident fund, or is their entire contribution converted into a pension? I hope my query is clear.

Please advise.

Regards,
Sai

Understanding the Pension Scheme After 10 Years of Service

Once an individual completes 10 years of continuous service in the Provident Fund (PF), the company's contribution towards their pension scheme (approximately Rs. 541 maximum per month from Rs. 6500/- (8.33% * 6500), which is the limit for pension contribution by the company) goes into the Provident Fund Scheme and gets dissolved. You become eligible for the pension after retirement, and the PF office fixes an approximate amount to be given to an individual after retirement, taking into consideration the total number of years you have contributed.

Please note, one should not think that the amount an individual is receiving as a pension is from the contribution amount credited through the company's contribution into their pension scheme. It is from the ocean of the PF pension scheme in which all Indians working in private organizations have contributed.

Withdrawal of Provident Fund After Resignation

After serving more than 10 years and then resigning, one can withdraw the Provident Fund amount, which includes 12% of the individual's contribution and 3.67% of the management's contribution amount through Form No. 19. However, one cannot apply for withdrawing the pension amount by submitting Form No. 10-C.

A small clarification to post #2 above would be in order, I think. The contribution towards a pension does not go to the EPF account and get dissolved. It goes to a separate 'pension fund'. Pension after the age of 58 is paid out of this 'ocean of fund'. It is paid as per the formula. The formula is as follows:

Pension Formula

Monthly Pension = (Pensionable salary X Pensionable service) / 70. This has no connection with the payment of the provident fund (EPF) accumulations. That will be paid separately.

Pension is payable only after the subscriber attains the age of 58. (Family pension to the nominee of the member can be paid immediately after the death of the member without waiting for the age of 58.) The member has to make an application in the prescribed form to the RPFC concerned through the last employer. RPFC will sanction the pension.

Pension Scheme Details

Employee receives the pension every month after reaching 58 years of age. The formula for calculating the pension amount is Pensionable Salary * Pensionable Service / 70. Additionally, the central government contributes 1.16% every month along with the employer's contribution, which is either ₹541 or 8.33%.