Guide to Understanding the Employee Pension Scheme

As per the latest changes in the Employee Pension Scheme that are effective since 1^st September 2014, the EPF is distributed as 12% of the employee’s salary goes into the EPF account and 12% of the employee’s salary is divided into 3.67% for EPF, 8.33% for EPS, 0.5% for EDLI 1.1% as EPF admin charges and 0.01% as EDLI Admin charges. The minimum pension under EPS is Rs 1000 and EPF is mandatory for those employees drawing a salary less than Rs 15,000 a month. EDLI cover for each employee has been raised from Rs 1.56 Lakh to Rs 3 Lakh

Guide to understanding the Employee Pension Scheme (EPS) 1995

• Employees are automatically enrolled into the EPS scheme only if they are members of the EPF scheme.
• The central government also contributes to an employee’s EPS along with an employer contribution of 8.33% of the salary. The central government contributes 1.16% of the employee’s salary but salary is considered as basic pay plus daily allowance and is taken as a maximum of Rs 6500
• Contributions made to the EPS by the employee does not generate any interest.
• Eligible service is calculated in intervals of 6 months. If an employee has had a service of more than 6 months it is rounded to the next year and less than 6 months is rounded to the previous year. For example, if an employee has had a service of 18 years and 8 months, the service is considered as 19 months and if the employee has had a service of 18 years and 4 months, the service is considered as 18 years
• Pension received is lifelong and passes on to spouse and two children upon the employee’s death
• Employees can receive only pension from EPS and are eligible only after completion of 10 years of service and must have attained the age of 50 years for early pension and 58 years for regular pension

What is the contribution for Employee Pension Scheme?

12.5% of the basic salary plus dearness allowance of the employee goes towards EPF, according to PF rules. Given below are the contribution details from the employee and the employer towards EPF, EDLIS and EPS.

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%

Monthly Pension Calculation (Employed after 16/11/1995)

The pension amount for those employed after 16th November, 1995 is calculated as follows:

Pension amount = (Pensionable salary * Service period)/70

In order to calculate the monthly pension in this case, following points need to be kept in mind:

• Pensionable salary is the average income of preceding 60 months. Most employers have a restriction on pension contribution to either Rs.1,250 or 8.33%, whichever is minimum. In these scenarios, the maximum pensionable salary would be Rs.15,000.
• Only the basic pay and dearness allowance is considered as salary.
• If an employee has completed over 20 years of service, then two years should be added as a bonus in the equation. According to the rules, the bonus can be also applied for the service before 16/11/1995.
• The new rules make it mandatory for the pension to be more than Rs.1,000 per month.
• An employee is eligible for a pension after completion of 10 years of service.

Terms and conditions of EPS

Some of the important terms and conditions of the Employees’ Pension Scheme are:

• An employee must complete a minimum of 10 years in service in order to avail pension through EPS.
• An employee can only avail pension after he or she turns 50 years old.
• An employee cannot have more than one EPF account.
• Government contribution towards EPS cannot be more than 1.16% of Rs.15,000. The maximum contribution from the government in a pension account is not more than Rs.174.
• The provision for commutation of EPF pension is not available anymore.

Forms Related To Employees’ Pension Scheme (EPS)

There are various forms that need to be submitted to avail different benefits under EPS. They are:

Form name	Filled by	Benefit
Form 10C	Beneficiary or member	Withdrawal benefit Scheme Certificate
Form 10D	Member	To avail pension after 58 years of age To avail pension before 58 years but after turning 50 To avail disability pension
Form 10D	Nominee or widow/widower or Children	To avail nominee or dependant pension To avail family pension To avail children or orphan pension
Life Certificate	Pensioner	To be submitted by pension beneficiary or children every November To be submitted to the manager of pension disbursing banks
Non-remarriage Certificate	Widower/widow	To be submitted by widower every year To be submitted by widow at the beginning of pension To be submitted to the manager of pension disbursing banks