The Employees Pension Scheme (EPF), run by the Employees Provident Fund Organization or EPFO, serves to give pension to organized-category employees. Employees who have been contributing to the EPF for at least ten years are eligible for this scheme. When the applicant hits the age of 58, the scheme begins to generate monthly pensions. The pension contribution in EPF is not covered by employees and employers, unlike the EPF contribution. The EPS pension gets just 8.33 percent of the employers' share of the 12 percent. Here we will discuss all the rules and eligibility criteria to avail the benefits of the EPF pension scheme.
An individual must meet the following criteria in order to be eligible for benefits under the Employees' Pension Scheme (EPS):
- He or she must be a member of EPFO
- He or she must have completed at least 10 years of service or employment.
- He or she must have reached 58 years of age.
- Even so, all members of the Miscellaneous Provision Fund, as well as Employee Provident Fund's beneficiaries, are eligible for the EPF pension scheme.
How to calculate pension uunder EPS?
The monthly pension benefit under the Employees Pension Scheme is determined by the employee's pensionable salary and pensionable service period. The following formula can be used to calculate the amount.
For pensionable salary: The pensionable salary is the employee's overall monthly salary for the last 12 months of service. Any non-contributory day in the previous 12 months will not be taken into account, and the amount will be paid to the employee.
Assume that one employee's monthly salary is Rs 30,000. Because the employer contributes 8.33 percent of this salary to the employee's EPS fund, the pensionable salary in this case is:
Rs 30,000 x 8.33 / 100 = Rs 2,499 (monthly pension amount), Annual pension amount will be: Rs 2,499 x 12 = Rs 29,988.
If an employee does not start employment on the first of the month, his or her salary for the month will be calculated based on his or her working days rather than 30 days. If someone starts working on the 5th of the month, the salary will be determined for the next 25 days depending on the amount paid per day. That being said, for EPS calculation, the monthly salary will be the salary for the whole month.
For pensionable service: The term "pensionable service" refers to the period an employee has worked. If an individual withdraws from the EPS scheme before serving the required minimum service period, i.e. 10 years, the contribution to the EPS scheme will have to be updated. The member's actual service period is called pensionable service. While determining the pensionable service period, service periods by various employers are added together. Any time an employee changes the existing job he must receive an EPS Scheme Certificate and submit it to his new employer. It's important to note that after 20 years of employment, the employee receives an additional 2 years of pensionable service. As six months is the minimum period of pensionable service, it is used to calculate the pensionable service period. The term of pensionable service will be classified as 5 years and 3 months if the service duration is 5 years and 3 months. That being said, if the period exceeds six months, it is considered as a year, so a span of five years and six months or more is classified as six years. Let's use the previous formula to measure the monthly pension.
Rs 29,988 (annual pensionable salary) x 18 years (years of pensionable service) / 70 = Rs 7,711.2 (monthly EPS pension amount).
Pension benefits under EPS
From the time they start withdrawing their pension, all EPFO members who are eligible will receive pension benefits based on their age. The amount of the pension varies depending on the circumstances which are as follows:
Pension at the age of 58 years: Upon reaching the age of 58, a member is eligible for pension benefits. When he reaches the age of 58, though, he must have served for at least ten years in order to be eligible for pension benefits. An EPS Scheme Certificate is issued, which can be used to fill Form 10D for monthly pension withdrawals.
Pension benefit on leaving employment before being eligible for Monthly Pension: If a member is unable to continue his or her service for ten years until reaching the age of 58, he can withdraw the whole amount by filling out Form 10C at the age of 58; however, he will not receive monthly pension payments until retirement.
Pension on disabled totally and permanently: Regardless of whether or not he has completed the pensionable service duration, an EPFO member who becomes completely and permanently disabled is eligible for a monthly pension. To be eligible for the pension, his employer must deposit funds in his EPS account for at least one month.r From the day of permanent disability, the member is liable for a monthly pension, which is provided for the rest of his or her life.
Pension in case of death of the member: If a member dies while on employment and the employer has deposited funds in his EPS account for at least one month, if the member has served 10 years of employment and dies before reaching 58 years of age, or if the member dies after the monthly pension begins, the member's family becomes liable for pension payments.
Types of pensions under EPS
Pensions for widows, children, and orphans are among the many forms of pensions available under EPS. Follow the below-listed points to know in brief:
Widow pension: Widow pension is provided to the widow of a pension-eligible member. The pension balance will be paid until the widow's death or remarriage. If there are multiple widows, the pension will be paid to the oldest widow. The amount of the widow's pension is determined by the employee's pension amount. The widow pension has a minimum amount of Rs 1,000.
Child pension: The surviving child of a deceased employee receives a child pension from the Employee Pension Scheme. The overall amount of a child pension that can be issued is 25% of the widow pension. The child will be entitled to the pension until he or she turns 25. It's important to note that the child pension is calculated in the same way as the widow pension.
Orphan pension: If the employee dies without a surviving widow, the orphan pension becomes eligible to the surviving children. His children will be eligible for a monthly orphan pension of 75% of the monthly widow pension.
Reduced pension: If an employee chooses to withdraw his or her pension before meeting the age of 58, he or she will receive a 4 per cent annually at a reduced rate. When a member of the EPFO has served ten years of service and is between the age of 50 and 58, he or she is qualified for an early pension. Under this situation, the pension amount is reduced by 4% for every year if the pensioner is under the age of 58.