Employees’ Pension Scheme

The Employees’ Provident Fund Organisation (EPFO) recently allowed subscribers, who have retired after September 1, 2014, to opt for higher pension under the Employees’ Pension Scheme (EPS). Retired subscribers and those who continue to be in service can sign up for higher pension.

But there is a catch. Subscribers will be eligible only when 12 per cent of the employee’s basic salary is contributed both by the employee and the employer with prior permission of the EPFO by the hiring entity.

The employee’s contribution goes towards Employees’ Provident Fund (EPF), and the employer’s contribution is split between EPF and EPS. In 2014, EPF limited the maximum salary to be received as pension to Rs 15,000, according to the EPF website.

HOW DOES IT WORK?

• EPS provides a fixed income as pension upon superannuation.
• Employees with a basic salary and dearness allowance (DA) of Rs 15,000 or less must enrol in EPS.
• EPFO members who’ve finished 10 years of service are eligible for EPS.
• The employer and employee each give 12 per cent of the employee’s basic salary and DA to EPF.
• Employee’s contribution goes to EPF, and the employer’s part is split between EPF (3.67 per cent) and EPS (8.33 per cent).
• EPF members prior to September 1, 2014, can ask their employers to redirect the EPF contribution towards pension at retirement.

EPS PAYOUTS

• Pension is paid on attaining 58 years or early retirement at 50.
• The monthly pension is calculated using the formula: (Pensionable salary x pensionable service)/70.
• The returns are guaranteed by the government and the corpus is accumulated at the rate announced for EPF.
• Pensioner has to submit a life certificate every November after retirement to receive pension.
• The nominee has to submit Form 10D to claim pension after the demise of the pensioner.
• Allows for full withdrawal of pension sum at the age of 58 if the member leaves service 10 years prior to attaining 58.

Succession

• If the employee dies while in service, the pension benefit will accrue provided at least one month’s contribution has been paid into the EPF.
• The minimum monthly widow pension has been fixed at Rs 1,000 and continues till demise or remarriage.
• In case of death of the spouse, the nominee or next of kin will receive the balance corpus.
• Surviving children of the deceased employee will receive monthly children pension till age 25, besides the widow/widower pension equal to 25 per cent of the pension for each child limited to two children.