Did you know that when you switch from one job to another, only the EPF (Employees' Provident Fund) balance is transferred to the new PF account with the new employer but not the EPS (Employees' Pension Scheme) balance?
This article throws light on how EPS contributions are made and what happens when you switch jobs.
How does EPS work?
- An employee makes a contribution of 12 percent of his/her basic salary towards EPF only. The compulsory equal contribution of 12 percent that the employer makes also goes to EPFO (Employees' Provident Fund Organisation) fund of the employee but the major portion (8.33 percent) goes to EPS, with a cap of Rs 1,250 per month.
- One is eligible for pension only after completing 10 years of service under EPS. The pension will be received after you reach 50 or 58 years of age (subscriber can choose when to retrire). The former will get lesser amount of pension than the latter.
- When you switch your job, you have to submit form 11 and 13 to request a transfer of PF balance from the older organisation to the new one.
- On transfer, the EPF balance in the new PF account (UAN remains the same but PF account will change if the new employer is from a different area jurisdiction) will be reflected as a lump sum for the month of transfer but the EPS balance will be nil. If you check the records of old PF accounts, it will still reflect the EPS balance. This can be observed in all of your previous employers' PF accounts.
- Since EPS is a pension scheme, it does not earn any interest like that of on your EPF balance.
- The maximum pensionable salary is capped at Rs 15,000 and the maximum number of service years is capped at 35. So the highest amount of pension one can receive from EPS on retirement is Rs 7,500, irrespective of their basic salary or number of years of service.
What can you do?
If you have not completed 10 years of total service, withdraw your EPS by submitting form 10C or take the 'scheme certificate.' The scheme certificate is a proof from the EPFO of the contribution towards your EPS deposit that you can submit at the next organisation that provides EPF cover (supposing your immediate change of job doesn't provide EPF coverage). You can accumulate the certificates from all your previous employers by doing the same. The scheme certificates are EPFO's way to keep track of the number of years of employment.
Note that the EPS withdrawal cannot be made if you have worked for the organisation for less than 6 months, but a scheme certificate can be obtained.
How much of the EPS will you receive on withdrawal before 10 years?
You will not receive the entire contribution made by the employer. You will, however, receive your share in the following proportion:
|Years of service||Proportion of wages (%)|
EPS Scheme Certificate
You can choose to apply for the scheme certificate instead of withdrawing the amount on quitting your job before completing ten years of service. The scheme certificate mentions the EPS accumulation along with the number of years of service. If you quit multiple jobs, you will have to apply for it through form 10C, each time you quit a job and get it updated.
On completing ten years of total employment (not necessarily at one organisation), EPS cannot be withdrawn, you can only apply for the scheme certificate.