What is Employee Pension Scheme? Eligibility & Advantages

Employees’ Pension Scheme (EPS) is one of the most popular retirement savings schemes available in India. Aimed at salaried employees of organisations, the scheme financially secures their post-retirement lives by providing them with a regular income source. Read on to learn more about the Employees’ Pension Scheme, benefits it offers and other crucial information.

What is the Employees’ Pension Scheme?

Introduced in the year 1995, the Employees’ Pension Scheme (EPS) is a retirement savings scheme for employees of the organised sector. This scheme is administered by the Employees’ Provident Fund Organisation (EPFO). Here, all individuals who are eligible for the Employees’ Provident Fund (EPF) are also eligible for EPS.

According to the scheme, your employer is required to contribute around 8.33% of your salary towards EPS. The maximum salary for the purpose of this scheme is restricted to Rs. 15,000 per month. This means that your employer would have to contribute about Rs. 1,250 each month towards your EPS account.

These monthly contributions made by your employer build a corpus, which is used to provide you with monthly pension payments after you retire. You can use these regular pension payments to financially secure your post-retirement life.

EPS Update: Increase in the Employer Contribution Towards the Scheme

The Union Labour Ministry increased the amount of contribution towards EPS via a notification published on May 4, 2023,. According to the notification, employers are now required to contribute an additional 1.16% over and above the existing 8.33% of an employee’s salary towards the scheme.

This means that employers would now have to contribute 9.49% of an employee’s salary, which comes up to around ₹1,800 per month. This new provision has been implemented with a retrospective effect from September 1, 2014.

Eligibility Criteria for the Employees’ Pension Scheme (EPS)

As long as you’re eligible for the Employees’ Provident Fund (EPF) scheme, you will automatically be eligible for EPS.

However, there are certain criteria you need to satisfy to be eligible for receiving pension benefits under the scheme. Here’s a quick overview of what they are.

You must have completed 10 years of active service along with an equivalent number of years of contribution toward the scheme
You must be 58 years old to receive full pension benefits
In the case of reduced pension benefits, you must be at least 50 years old

Note: Once you complete 58 years of age, you can choose to defer your pension payments by up to 2 years (till you attain 60 years of age). In this case, you will be eligible to receive an additional pension of 4% for every year of deferment.

Advantages of the Employees’ Pension Scheme (EPS)

The Employees’ Pension Scheme offers a plethora of benefits to employees in the organised sector. Let’s take a look at some of the key advantages you get to enjoy.

Regular Income Source

When you retire, you lose your primary source of income. The fixed monthly payments provided by EPS can act as an alternative income source, which you can use to meet your essential expenses post your retirement.

Guaranteed Payments

Since the scheme is administered by the Employees’ Provident Fund Organisation (EPFO), which is a government-backed entity, the monthly pension payments are guaranteed.

Disability Pension

If you suffer partial or total disability during your employment, you automatically become eligible to receive a monthly pension irrespective of whether you’ve completed 10 years of active service.

Premature Exit

You can prematurely exit the scheme by fully withdrawing the funds in your EPS account before you complete 10 years of active service.

Transferability

In the case of a job switch, you can transfer your EPS account from your old employer to your new employer. All you need to do is submit a composite claim form online by logging into your EPF member portal.

Different Types of Pensions Under the Employees’ Pension Scheme (EPS)

The Employees’ Pension Scheme offers four types of pensions. Here’s a quick glimpse of each pension type.

Widow or Widower Pension

If an EPS member dies during active service, their surviving spouse would be eligible to receive a widow or widower pension. However, this pension would only be paid if the member completes at least one month of active service.

Child Pension

If the deceased member leaves behind a child in addition to a spouse, the child would be entitled to receive an additional pension over and above the widow’s pension. The maximum child pension is limited to 25% of the widow’s pension and is paid only until the child attains 25 years of age.

Orphan Pension

If the EPS member leaves behind only a child and not a spouse, the surviving child would be entitled to receive an orphan pension. The maximum amount is limited to 75% of the monthly pension and is available for up to two children.

Reduced Pension

Once you attain 50 years of age, you can apply for and receive monthly pension benefits without waiting for your retirement. However, you would only be eligible for a reduced pension. In this case, your monthly pension will be reduced by 4% for every year less than 58 years. For instance, if you apply for a reduced pension when you’re 55 years of age, your monthly pension will be reduced by 12% [4% x (58 – 55)].

What are the Different Types of Pension Forms?

As a member of the Employees’ Pension Scheme, you may be required to file certain forms with the organisation. Here’s a quick look at some of the different types of EPS forms you may have to file.

Pension Form	Who Should Submit It?	Purpose
Form 10C	Member	To fully withdraw the funds in the EPS account before the completion of 10 years of active service
Form 10D	Member or Surviving Spouse	For receiving pension benefits like reduced pension, widow pension or child pension
Life Certificate	Pensioner or Claimant	To certify that the pensioner or the claimant is alive
Non-Remarriage Certificate	Widow or Widower	To certify that the widow or widower has not remarried after the death of the member
New Form 11	New Member	To create and activate UAN and EPS account

Conclusion

The Employees’ Pension Scheme (EPS) is a good social security scheme aimed at securing the financial future of employees in the organised sector. The EPS ‘95 pension that eligible employees receive after retirement can be used to meet their expenses and live a comfortable and independent life.

If you’re an EPS member, you can check the amount of pension contribution made by your employer by logging into your EPF member portal. Additionally, you can also submit a request for pension withdrawal by submitting an online claim form through the member portal.