Features of the Employee Pension Scheme (EPS)
- Employees who are members of the EPF will automatically become members of the EPS.
- Along with your employer's contribution of 8.33% of your salary, the Central Government also contributes 1.16% of the employee’s monthly salary. Here, the term "salary" refers to Basic + DA. The rulebook still adheres to the old salary limit of Rs. 6,500 for employer and central government contributions. However, in my view, after the new rules, the limit should be raised to Rs. 15,000.
- You will not receive any interest on your EPS contribution.
- For calculation purposes, if your service is more than or equal to 6 months, it will be rounded to the next year. If it is less than 6 months, then such a fraction of the service period is not considered for calculation. For example, suppose you worked for 21 years and 7 months. In this case, your service is considered as 22 years. However, if your service is 21 years and 2 months, then the service will be considered as 21 years only.
- Pensioners receive a pension for life, and upon their death, it will go to the spouse and two children below 25 years of age.
- Employees are eligible for EPS only if they complete 10 years of service or attain the age of 58 or 50 years.
- You will not be eligible to receive more than one pension from EPS.
Eligible Service for EPS
As mentioned above, for calculation purposes, if your service is more than or equal to 6 months, it will be rounded to the next year. If it is less than 6 months, then such a fraction of the service period is not considered for calculation. For example, suppose you worked for 21 years and 7 months. In this case, your service is considered as 22 years. However, if your service is 21 years and 2 months, then the service will be considered as 21 years only.
Pensionable Service for EPS
The pensionable service is determined by the number of years your employer contributed on your behalf. If your employer failed to deposit the amount, then such months are not considered for the calculation of service. Also, if an employee completed 58 years of age and completed 20 years of service or more, his pensionable service will be increased by 2 years for calculation purposes.
Pensionable Salary for EPS
It is the last 12 months' average salary during the contribution period preceding the date of exit from the membership of EPS. In case the employee did not receive full payment during those last 12 months, the average of the last 12 months' full pay drawn by him during the period for which contribution to the EPS was recovered will be considered for EPS calculation. In cases where the employee hasn’t contributed to EPS during the last 12 months, including instances like drawing a salary as part of a month, the total salary during the 12-month span will be divided by the actual number of days for which salary has been drawn. The amount derived will be multiplied by 30 to arrive at an average monthly salary.
When Do Employees Get the Pension?
a)
Superannuation - To avail of such a pension, you must complete 10 years of service and be 58 years or older. An employee can continue his job while receiving his monthly pension. However, he cannot be a member of EPS and hence no more fresh contributions to EPS.
b)
Early Pension - To avail of such a pension, you must complete 10 years of service and be between 50 and 58 years old. To avail of such early pension, an employee must not be working.
c)
Death of an Employee - An employee is eligible for EPS if death occurs as follows:
- If death occurs during service, and at least one month's contribution is made to EPS, then his nominee will be eligible to receive the EPS.
- If death occurs while not in service, i.e., after the service but before attaining the age of 58 years.
In both cases, the employee's family is eligible for a pension. In the case of a deceased employee having a family, a pension is payable to the spouse and two children below 25 years of age. When a child reaches 25 years of age, the third child below 25 years of age will be given a pension, and so on. If the child is disabled, he may get a pension until his death. Only two children will receive a pension at a time. In the case of an employee not having a family, the pension is payable to a single nominated person. If not nominated and having a dependent parent, the pension is payable first to the father and then, upon the father's death, to the mother.
d)
Permanently and Totally Disabled - If an employee is unfit to do his job due to accidental permanent and total disability during a job, he is eligible for the pension.
How to Calculate the Employee Pension Scheme Pension
There are two methods based on the service you joined. One is for those who joined before 15th November 1995 and another for those who joined after this date.
1)
Employees Who Joined Before 15th November 1995
The pension is calculated separately for Past Service & Pensionable Service.
a)
Procedure for Calculation of Past Service Pension
- Find out the total past service, i.e., subtract the Date of Joining from 15.11.1995, duly rounding the service in years.
- Find out the salary as of 15.11.1995, whether it is up to Rs. 2500 or more than Rs. 2500.
- Accordingly, locate the past service benefit from the table given below.
- Find out the period that had elapsed between 16.11.1995 and the date of exit, and based on this period, locate the corresponding Table ‘B’ Factor. The Date of Exit is the date of attaining 58 years for superannuation/early pension, the date of death for widow pension, and the date of disablement for disablement pension.
- Multiply the Past Service Benefit and the Table B factor, which gives the Past.
b)
Procedure for Calculation of Pensionable Service Pension
- Find out the category of the member as to whether he belongs to X, Y, or Z Category.
- X – Date of commencement of pension is between 16.11.1995 and 15.11.2000; Y – Date of commencement of pension is between 16.11.2000 and 15.11.2005; Z – Date of commencement of pension on or after 16.11.2005.
- Find out the Pensionable Service and Pensionable Salary of the member and substitute the same in the formula given as below.
(Average Salary X Service)/70
- If the formula pension calculated is less than 335/438/635 respectively, for X, Y, Z categories, then only that minimum pension is to be given.
c)
Procedure for the Calculation of Total Pension
- Add the Past Service Pension and the Formula Pension.
- If the total pension is less than 500/600/800 respectively, for X, Y, Z categories, then that minimum pension shall be the total pension.
- But this total pension is for an eligible service of 24 years or more, and if the eligible service is less than 24 years, then this total pension has to be proportionately reduced subject to a minimum of 265/325/450 depending on X, Y, Z categories (only when the minimum pension is given).
- If the total pension itself is more than the minimum, then the proportionate reduction need not be made even if the eligible service is less than 24 years.
2)
Employees Who Joined After 15th November 1995
You can directly calculate by inserting the values in the formula as given below.
(Average Salary X Service)/70
You can find the detailed calculation of this with an example at
HERE or at
HERE.
How to Apply for the Pension
Once you complete the service of 10 years, you get the scheme certificate. This scheme certificate can be used to claim your pension either from 58/50 years. The employee has to include all his past services to arrive at such 10 years of service and apply for a pension once he attains the age of 58/50. He needs to fill Form 10D and get it attested by the bank manager with a photo and other required documents. Submit the form to the concerned EPFO.
Can One Withdraw the EPS Amount Before 10 Years?
Yes, you can withdraw the contributed EPS amount along with your EPF balance. But the condition is you must not have completed 10 years of service. When you withdraw EPF, you receive EMPLOYEE + EMPLOYER EPF contribution + Interest earned on this EPF. Along with that, some % of EPS contribution will also be paid. This % is determined by Table D of EPS, which is given below. Hence, whatever may be your contribution to EPS, you will get only some % of this based on the number of services and salary.
This is calculated as below.
Wages as on the date of exit X Corresponding Table ‘D’ factor. Here, wages mean Basic Salary + DA for EPS at the time of withdrawal. Therefore, suppose your salary is Rs. 15,000 at the time of withdrawing and you completed 7 years, then you receive the EPS of Rs. 1,06,950 (Rs. 15,000 * 7.13). This is the amount you get, irrespective of your actual contribution to EPS. You have to submit Form 10C along with other forms of EPF withdrawal to your HR.
Regards