Understanding the Employee Pension Scheme (EPS)

Understanding the Employee Pension Scheme (EPS)

The Employee Pension Scheme (EPS) is a social security program in India that offers retirement income to eligible employees. Introduced in 1995 by the Employees' Provident Fund Organisation (EPFO), EPS helps ensure financial security for individuals after their working years.

Who is Eligible for EPS?

The EPS applies to most salaried employees working in factories and other establishments covered by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. This includes employees of most companies, organizations, and even some government departments.

To be eligible for a pension under EPS, an employee must meet specific criteria:

• Minimum Service: You must have completed at least 10 years of service (not necessarily continuous) to qualify for a pension upon reaching retirement age.
• Age of Retirement: The standard retirement age under EPS is 58 years.
• Early Pension: If you have completed 10 years of service but are between 50 and 58 years old, you can opt for an early, reduced pension.

How Does EPS Work?

Both employers and employees contribute to the EPS. Each month, 12% of an employee's salary (basic salary and dearness allowance) is deducted and deposited into the scheme.

• Employee Contribution: The entire employee contribution (12%) goes towards the Employee Provident Fund (EPF).
• Employer Contribution: Out of the employer's 12% contribution, 8.33% goes towards the EPS, while the remaining 3.67% is deposited into the employee's EPF account.

The EPS amount is accumulated over your employment years, and the pension you receive after retirement is calculated based on your average salary in the last few years of service and your total service period.

Types of Pensions under EPS

• Regular Pension: Upon reaching the retirement age of 58 years and completing a minimum of 10 years of service, you become eligible for a regular monthly pension.
• Early Pension: If you have 10 years of service but are between 50 and 58 years old, you can choose to retire early and receive a reduced pension. The pension amount will be deducted by 4% for each year you are below the standard retirement age.
• Disability Pension: In case of total and permanent disability during your service period, even if you haven't completed the minimum service requirement, you may be eligible for a monthly disability pension.
• Survivor Benefits: If an EPS member dies while in service or after retirement, their family may be entitled to pension benefits. This includes:
• Widow Pension: The surviving spouse (widow) can receive a monthly pension until their death or remarriage.
• Child Pension: Up to two dependent children of the deceased member can receive a monthly pension until they reach 25 years old. The amount is typically 25% of the widow's pension.
• Orphan Pension: In the absence of a surviving spouse, dependent children can receive a monthly orphan pension amounting to 75% of the widow's pension.

Benefits of EPS

• Financial Security: It provides a guaranteed source of income after retirement, helping you maintain your standard of living.
• Support for Dependents: In case of the member's death, the pension scheme offers financial assistance to their family.
• Early Retirement Option: With a minimum of 10 years of service, you can opt for early retirement with a reduced pension.
• Disability Coverage: The scheme provides a safety net in case of total permanent disability during your working years.

Key Points to Remember

·       Maximize benefits: Contribute regularly throughout your career.

·       Avoid service gaps: If you switch jobs, ensure that your EPS account is transferred to your new employer.

·       Track contributions: View your EPS details online through the EPFO website.

·       Pension adjustments: The government may revise EPS pension amounts.