In today's constantly changing world, retirement planning has become more critical than ever. Since employees spend a significant portion of their lives at work, ensuring adequate funds during their retirement is crucial.
In this blog, we explore what EPS (Employee Pension Scheme) is and how can one save in a structured manner through EPS for retirement.
What is Employee Pension Scheme (EPS)?
Employers offer employee retirement benefit plans, or pension schemes, to their workforce. These schemes are designed for employees in the organized sector, where the employer is registered with the Employees' Provident Fund Organization (EPFO) and makes the necessary contributions.
To avail of the Employees' Pension Scheme (EPS) benefits, an employee must work for at least 10 years. Under this scheme, the employer contributes 8.33% of the employee's salary to a maximum of Rs. 1250 towards the pension fund.
Latest Update for EPS: Additional 1.16% To Come From Employer’s Contribution
In May 2023, the the Labour Ministry announced that employers will now contribute an extra 1.16% towards this scheme. This news is a welcome relief for many employees, as it means increased savings for their retirement.
Previously, the employer's contribution to the EPS was fixed at 8.33% of the employee's basic salary, capped at Rs.1,250 per month. However, with this latest announcement, the employer's contribution will rise to 9.49% of the employee's basic salary, with a maximum of Rs.1,800 per month.
Objectives of Employee Pension Scheme (EPS)
This scheme aims to:
provide a source of income after retirement and serve as a long-term savings instrument
to build a corpus of cash by using contributions from both the employer and employee
Eligibility Criteria for Employee Pension Scheme (EPS)
Be an EPFO member
Complete 10 years of active service along with equal years of active contribution towards the EPF pension Scheme
Be 58 years or above
Have attained at least 50 years of age to withdraw from the EPS pension at a lower rate
Delay withdrawing the pension for by 2 years, i.e., till he or she is 60 years, to become eligible to get EPS pension at a rate of 4% annually
Benefits of Employee Pension Scheme (EPS)
Retirement financial security: The primary purpose of an employee pension plan is to provide financial security during retirement. Employees can save for retirement by setting aside a portion of their pay throughout their working years, which can offer a steady income stream once they stop working.
Tax benefits: Pension plans often offer tax benefits for contributions made by both employers and employees, which can lower overall tax burdens.
Long-term investment tool: Employee pension plans invest in diverse securities, with the potential to yield significant long-term returns and boost retirement savings.
Plan flexibility: Employee pension plans often provide flexibility, allowing workers to transfer their pension benefits when changing jobs and customize their retirement savings to meet their specific needs.
Spouse and children’s pension: If an employee passes away, their spouse will receive their pension amount. The pension will then be given to the children, who will receive it until they turn 25, providing financial assistance to the family after the employee's death.
Types of Employee Pension Scheme (EPS)
There are 4 primary types of pension schemes. They are listed below:
Widow Pension: In this case, the widow of the member of EPS receives the pension.
Child Pension: In this case, the widow and children of the member of EPS receive the pension.
Orphan pension: In this case, the children of the member of EPS receives the pension.
Reduced pension: If you have withdrawn an early pension, the pension you receive in retirement slashes by 4% every year.
How to Calculate Your Employee Pension Scheme (EPS) Amount?
The amount of pension in the PF is determined based on the member's pensionable salary and length of service.
Here is the formula to calculate your monthly pension income:
How to Check Your Employee Pension Scheme (EPS) Amount?
Choose the 'For Employees' option from the drop-down menu.
Click on 'Members Passbook'.
Log in to the page using your UAN credentials.
Tap on 'Passbook'.
Select the relevant Member ID.
The entire EPS amount contributed will be shown under the 'Passbook Overview' column.
Alternatively, you can download it in PDF format.
How to Withdraw Your Employee Pension Scheme (EPS) Amount?
Withdrawing Your Employee Pension Scheme (EPS) Amount Online:
Visit the Unified Member Sewa portal and log in with your password and UAN.
Under the ‘Online Services’ option, select ‘Claim (Form-31, 19 10C & 10D)’.
The member details, KYC and other service details will be displayed on the screen.
Enter the bank account number and click ‘Verify’.
Select the claim type as ‘Withdraw Pension Only.’
Go to the menu ‘I want to apply for’ and click ‘Only Pension Withdrawal (Form 10C).’
Enter the permanent address in Form 10C and tick the disclaimer section.
Click on ‘Get Aadhaar OTP.’ An OTP will be sent to your Aadhar-linked mobile number.
Enter the OTP, click ‘Validate OTP’, and then the ‘Submit Claim Form’.
Withdrawing Your Employee Pension Scheme (EPS) Amount Offline:
Download the composite claim form (with or without Aadhaar) from the EPFO website and submit the form to the jurisdictional EPF Office post providing the details.
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Frequently Asked Questions
1. Is EPS a part of EPF?
The EPS is a pension scheme managed by the EPFO that provides financial security to employees in the organised sector. It was created in 1995 and ensures that employees will receive a pension after reaching 58 years of age.
2. Who is eligible for EPS?
To qualify for EPS, employees must be members of the EPFO and have completed at least ten years of service. Those aged 50 or over may receive an early pension under EPS, while regular pensions are available to those aged at least 58.
3. Where do I find my EPS number?
Each participant in the Employee Pension Scheme (EPS) is assigned a member ID, which is the same as the member ID for their EPF account. You can find your member ID in the following places:
HR department of your organisation
Nearest PF office
4. How can I do EPS transfer online?
EPS transfer can be done online with Composite Claim Form. You must log in to the EPF Member Portal and apply for EPF transfer on the job change.
5. What happens to the EPS amount in case of a job change?
Earlier, in a situation like this, you had to submit out two forms:
Form 11: to certify that you are a member of Employees’ Provident Fund (EPF) schemes.
Form 13: to move your PF balance from the previous company to the new one.
But now, if you have an existing Universal Account Number (UAN), a composite Form 11 can fulfil both functions.
Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.