The Employees’ Provident Fund Organization (EPFO) manages the Employees’ Pension Scheme (EPS) for its members. Under this scheme, EPFO members receive monthly pension after a fixed period of time depending on their service period and salary. Employees’ Pension Scheme (EPS) EPFO was launched on 16 November 1995 to replace the Employees’ Family Pension Scheme 1971. In the previous family pension scheme, the family received pension only after the death of the member. However, the Employee Pension Scheme EPFO provides pension payments to both members and their families or nominees. Launched in November 1995, the objective of this scheme is to provide regular income to organized sector employees after retirement.
Eligibility for Employee Pension Scheme
To earn EPS pension, EPFO members have to fulfill certain conditions: minimum 10 years of service, reaching the age of 58 years, being a registered EPFO member and contributing regularly to the EPS scheme throughout their career. .
On joining a company or organized sector organization a person automatically becomes an EPFO member. For this, an amount is deducted from his salary every month, which is deposited in both EPF and EPS accounts. These funds secure the future of the EPFO member, provide pension after retirement or financial assistance in case of emergency.
EPF members deposit 12% of their basic salary in the Employees’ Provident Fund (EPF) during their service, to which their employer also contributes. The company’s contribution is divided into two parts: 8.33% is deposited in EPS and 3.67% in EPF.
Key Features of Employees Pension Scheme:
– Minimum service period for pension: 10 years
– Pension starting age: 58 years
– Minimum monthly pension: Rs 1,000
– Maximum monthly pension: Rs 7,500
In 2014, the central government had fixed the minimum pension at Rs 1,000 per month under EPS-1995. However, there is a demand to increase this minimum amount to at least Rs 7,500 per month.
pension calculator
Pension is calculated on the basis of the pensionable service of the member, taking into account the number of years he/she has contributed to the pension fund and the average salary of the 60 months preceding retirement.
Visit the official EPFO website www.epfindia.gov.in to calculate your estimated pension. Go to ‘Online Services’ section and click on ‘EDLI and Pension Calculator’ option.
On the new screen, see ‘How to use the EDLI and Pension Calculator’ for guidance. Click on ‘EDLI and Pension Calculator’ option on the left side to go back to the home page.
Select the ‘Pension Calculator’ tab to access the calculator. Fill your details to calculate your pension.
Formula to calculate EPS pension
Monthly Pension = (Pensionable Salary × Pensionable Service) / 70
Pensionable Salary: Average salary of last 60 months (maximum Rs 15,000)
Pensionable Service: Total years of service contributed to EPS.
Based on this formula, let us understand with an example how much monthly pension an employee with a pensionable salary of Rs 15,000 and 10 years of service will get: –
Monthly pension = (15,000 × 10) / 70 = Rs 2,143 per month
This example shows that even with a minimum service period of 10 years, an employee is entitled to pension. However, if the service period is longer, the monthly pension amount is higher.
There is no need for companies to do these two tasks, employees will do it themselves by visiting the EPFO site.