In 1995, the Employees’ Provident Fund Organisation (EPFO) started the Employee Pension Scheme (EPS) as a social security scheme. The EPS is highly beneficial for employees working in the organized sector since it provides them with a secure post-retirement pension.
So, where does this pension come from? The EPS is tied to the Employees’ Provident Fund (EPF). Each month, the employer and the employee individually contribute 12% of the employee’s salary towards the EPF. The employee’s entire share goes towards the EPF. On the other hand, 8.33% of the employer’s share goes towards the Employees’ Pension Scheme (EPS), and the remaining 3.67% goes towards the EPF.
Let us now explore the features and benefits of the EPS.
Features of the EPS
- To avail of the EPS, you should be a member of EPFO.
- This scheme is mandatory for employees who earn a basic salary and DA of Rs. 15,000 or less. So, if you are a member of the EPFO and fall under this pay scale, you get automatically enrolled for the EPS.
- To withdraw from your EPS fund, you should have completed at least ten years of service. Note that these ten years need not be continuous.
- You must be at least 58 years old to be eligible for a pension. However, you can withdraw your EPS at a reduced interest rate starting at 50 years. Or, you can defer it by two years and then receive an additional rate of 4% per year.
Benefits of the EPS
1. Guaranteed returns: EPS is a government-run initiative. So, there are no risks to investing in the scheme, and you will receive guaranteed returns. The minimum monthly pension amount that you will receive is Rs. 1,000. As per reports, the government plans to increase this to Rs. 2,000. When you want to start receiving your pension, you have to fill out Form 10D and receive an EPS Certificate.
2. Your family will receive your EPS after your death: In case of your death, your spouse will continue to receive the EPS amount until their death. After that, your children will receive the pension amount until they reach the age of 25 years. If the children are physically challenged, they will receive the pension amount until their death.
3. You will receive your EPS pension on total disablement during your service: If unfortunately, you become disabled totally and permanently during your service, you are entitled to a monthly pension. This benefit is applicable even if you have not yet completed your pensionable service period. Your employer has to deposit their share of funds in your EPS account for at least one month to be eligible for the pension. Then, this pension is payable for your lifetime.
You can check your current Employees’ Pension Scheme (EPS) deposit amount through the EPF Passbook portal. Use your EPF member Id to log in.
Do you need to arrange quick funds for immediate expenses? Turn to Tata Capital. We offer loans at affordable interest rates and flexible EMI options. Visit our website today.