We have discussed the basic contributions of EPF and how the money is invested, contributed and received by the employees. There is a component called EPS (employee pension scheme) and as per the law, a fixed amount or % of the employer’s contribution goes towards EPS which works as a retirement pension corpus for the employees.
While reading about EPF, I realized that EPS is more detailed than I had imagined and it has implications on the financial decisions of each employee. At the outset, it is a very good scheme, each month 8.33% of the basic pay is contributed towards EPS and on retirement, one gets the money back as a pension. Thus, the EPS part of your EPF works like an annuity plan.
Employees’ Pension Scheme (EPS)
- Employees are automatically enrolled in the EPS Scheme only if they are members of the EPF scheme.
- EPS is financed by diverting 8.33% of employer’s monthly contribution from the EPF. Monthly contribution to EPS is restricted to 8.33% of Rs. 15,000 i.e. Rs. 1250.
- Unlike the EPF contribution EPS, the part does NOT get any interest.
- The fraction of service for six months or more shall be treated as one year and the service less than six months shall be ignored. So 9 years and 6 months will be rounded up to 10 years.
- The lifelong pension is available to the member and upon his death members of the family are entitled for the balance pension.
- Pension received is lifelong and passes on to spouse and two children upon the employee’s death
- Employees can receive only pension from EPS and are eligible only after completion of 10 years of service and must have attained the age of 50 years for early pension and 58 years for regular pension
- No pension is payable before the age of 50 years.
- The maximum Pension per month is subject to a maximum of Rs 3,250 per month.
- Maximum service for the calculation of service is 35 years.
- No pensioner can receive more than one EPF Pension.
When can Employee Avail the Pension
Unlike EPF, EPS cannot be withdrawn at any point of career. There are only specific cases where the same will be receivable:
- Through Superannuation, where he/she has completed 10 years of service and is above 58 years and can continue to work. No fresh EPF will be made in his/her name.
- Early pension, when completed 10 years of service, between 50 to 58 years and is not working anymore.
- Unfit to perform the job or permanent disability
Transfer of EPS on Transfer of EPF from one company to another.
- When the employee switches jobs, the EPF gets transferred to the new employer, but not the EPS.
- When the employee switches jobs, the EPS amount or carries it forward to the next job. This, however, depends on the length of his service and his age.
- If EPF gets transferred the EPS also gets transferred. However, the UAN passbook shows amount as 0.
- While transferring PF from one establishment to another, the service details, information (like the length of service, non-contributory period, last wages drawn are furnished to the receiving PF office in Annexure K which will be used to calculate the pension benefits. AMOUNT IN PENSION FUND IS NOT REQ”.
Claiming Pension Money
- If you have scheme certificate of pension
Once the employee crosses the age of 50, he or she is entitled to get pension by Scheme Certificate. The employee is required to fill Form 10-D to avail regular pension. If the employee has more than one Scheme Certificate, he or she can directly go to the EPF office. This requires attestation of the employee’s Form 10-D by the bank manager.
- If you don’t have scheme certificate of pension
In case an employee has not completed 9.5 years of service, you must claim a pension refund. In order to do, you have to fill Form 10-C along with EPF Withdrawal form and submit it through your employer.