Many employees aren't aware of EPS and the contribution towards it. Under EPS, you will get a guaranteed monthly pension after the retirement with a aim to provide social security to its members and their families. Let's understand the contribution towards EPS and it's features.
Who is eligible for EPS
It is mandatory for all the employees whose basic salary is less than Rs. 15,000 per month to be enrolled to EPS. Before 1st Sep 2014, this limit was Rs. 6,500. For those, who have basic salary above Rs. 15,000 per month may contribute towards EPS but it's not mandatory.
Contribution towards EPS
As an employee you contribute 12% of our basic (basic salary + DA) towards Employee Provident Fund, EPF and same amount is contributed by your employer. However, total amount contributed by your employer doesn't add to your EPF amount, part of it goes towards your pension, EPS. Here is the detailed contribution from employee, employer and Central Government of India.
Employee Social Security Scheme
|
Employee
Contribution
|
Employer
Contribution
|
EPF (Employee Provident Fund)
|
12%
|
3.67%
|
EPS (Employees’ Pension Scheme)
|
Nil
|
8.33%
|
EDLIS (Employees’ Deposit Linked Insurance)
|
Nil
|
0.5%
|
EDLIS administrative charges
|
Nil
|
0.01%
|
EPF administration charges
|
Nil
|
1.1%
|
In the above table Government's share of contribution is @ 1.16% which goes towards EDLIS and administrative charges (last 3 rows) is shown in the employer column.
Features of EPS
- If you have completed 10 years of service, than you will get the pension, there is no option to withdraw. In case you haven't completed 10 years, you can choose to withdraw the EPS amount or get the pension after retirement.
- Minimum Pension amount under EPS is Rs. 1,000 and maximum is Rs. 7,500.
- Employees who are members of EPF will automatically become the members of EPS.
- Unlike your EPF balance, you will not get any interest on your EPS contribution.
- For calculation purposes, if your service is more than or equal to 6 months, then it will be rounded to next year. If it is less than 6 months, then such fraction of service period is not considered for calculation. For example, suppose you worked for 11 years and 7 months. In this case, your service is considered as 12 years. However, if your service is 11 years and 2 months, then service will be considered as 11 years only.
- You are eligible to get the pension at the age of 58 years. However, you can get the early pension after the age of 50. However, the pension amount would reduce.
- After the demise of an employee, the wife also gets reduced pension. Even two children can also get the pension till the age of 25. It is called as family pension. There is no minimum limit of service for the family pension. If the member is not married the nominee gets the pension till the death.
- You can not receiver more than one pension from EPS. For example, If both husband and wife are eligible for pension than you can not receive pension on behalf of your deceased spouse and your own pension.
- On the death of a pensioner. the pension is automatically payable to the spouse (widow / widower). On death or re-marriage of widow / widower, children will be given enhanced pension treating such children as Orphan.
- A Child with the permanent disability gets the pension till the death.
- Pension can be drawn from anywhere in India.
When employee gets pension
When Employee gets
Pension
|
Explaination
|
1) On Retirement
·
Age 58 years or More and
·
At least 10 years of service
|
The member can continue in service while receiving this
pension
On attaining 58
Years of age, an EPF member cease to be a member of EPS automatically.
|
2) Before Retirement
·
Age between 50 and 58 years and
·
At least ten years of service
|
The member should
not be in service.
|
3) Death of the member
|
Death while in service or.
Death while not in service |
4) Permanent disability
|
Permanently and
totally unfit for the employment which the member was doing at the time of
such disablement
|
Deferral of Pension
You have the option to defer the withdrawal of pension after 58 years but not later than 60 years of age. Employee can exercise this option by submitting a request letter to field office. Benefits available to the members who defer the pension are stated below -- Member who defer the pension up to 60 years without contribution.
Member may defer the pension up to 59 or 60 years of age without contribution. Benefit of increase in original pension amount of 4% in case of one completed year and 8.16% in case of 2 completed years.
- Member who defer the pension up to 60 years with contribution.
Member may defer the pension up to 59 or 60 years of age with contribution. Contributory service after 58 years of age will be included in calculation of pensionable service and pensionable salary, but will not be considered for determining eligibility.
Conclusion
Peanuts for pension, they say and rightly so. With the maximum pension capped at Rs 7,500 a month and not even indexed to inflation, the dependency on it is certainly not possible. From September 1, 2014, the EPS is only for those new members earning less than Rs 15,000. Therefore, new employees whose basic pay is more than Rs 15,000 will not see any diversion of 8.33 per cent (of the employer's share) towards the EPS. For older employees, the diversion will, however, continue.Related Links -
How much Pension will you get on your Retirement from EPSEPS Calculation for employees who joined before 16th November 1995
How much will you get from EPS when you leave your job
NPS Tax Benefits
Investments should be subject to investor knowledge
References
[1] EPS95_update102008.pdf
[2] Increasing wage ceiling to Rs 15000
[3] Benefit of deferring pension
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