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Your guide to Employee Pension Scheme (EPS) | Company Vakil
EPS

The Employees Pension Scheme (EPS) started its operation in the year 1995 to take care of employees of the organized sector. The scheme is covers all employees who are covered under the Employees Provident Fund (EPF) Scheme.

All employees covered under this scheme will receive pension that is on a permanent basis, the pension summing eventually passes on to the family members upon employee death. This article covers the various aspects of the scheme that every employee and employer should be aware of;

Features of the Scheme

The following are some of the major features of the Pension Scheme:

  • It is a sure pension plan authorized and supported by the Government, where the stipulated amount will be given to the employee upon retirement, without any change applied.
  • Member employees of the EPF scheme are automatically enrolled into the EPS scheme
  • All employees whose monthly salary when combined with DA is Rs 15,000 or lesser must register into this scheme.
  • Monthly pension amount is not being less than Rs 1,000.
  • Pensions can be given out when the employee attains the age of 50, but a reduction in the amount of eligible pension will be put into place.
  • The widow/widower of the deceased employee receives pension upon employees’ death. Children will be eligible to pension when they attain 25 years of age.
  • If the widow/widower wishes for re-marriage, the employees’ children will be the beneficiaries of enhanced pension as such children are categorized as orphans.
  • Any child who has any physical challenge will receive pension for his/her entire lifetime.

Eligibility to Avail Pension

Employees are can only handout pensions on the following grounds:

  • The employee was a member of the Employees Provident Fund Scheme.
  • The employee was in service for a minimum period of 10years.
  • The employee must have attained an age of 58.
  • One can claim pensions at the age of 50, but a reduction will be in the pension amount. A pension that is withdrawn in this way is known as ‘reduced pension’.
  • The employee has the right to refuse receiving their pensions until the age of 60. If this occurs, the creditable pension will be raised by 4% for every deferred year.
  • Employees will offer pension if they get debilitated.

Calculation of Eligible Service

Since we now know that an employee must have minimum of 10years served, let us understand the calculation of eligible years. If an employee service is more than or equal to six months, it is considered as a year. If it is not more than six months, then the period is not considered for calculation. An example, if an employee service is a period of 10 years and 9 months, the total number of service years will be considered as 11 years. If an employee’s service is of a period of five years and three months, the number of service years will be considered as five years.

Quantum of Contribution

Employers registered under this scheme must make a monthly contribution of 8.33% out of the salary they offer their employee. 1.16% of the same is contributed by the central government. The Body governing makes a maximum contribution of Rs 6,500. Employee contributions are exempted.

NB: – Salary=Basic salary + DA

Calculation of Monthly Pension

Calculation of monthly pension varies according to its classifications, which include the following:

  • Calculation of monthly pension for people employed after 16/11/1995.
  • Monthly calculation of pension for people employed before 16/11/1995.
  • Monthly Calculation Pension for People Employed after 16/11/1995

The calculation concerning such employees involves the using of a formula: amount of pension = (Pensionable salary * Service Period) /70

Pensionable salary – average income received in the preceding 5 years by him.

Note: If the employee completes 20 years of service, then two more years will be added in the equation as a bonus. This provision is applicable to the persons who have been employed before 16/11/1995.

  • Monthly Pension Calculated for People Employed before 16/11/1995

Monthly pension for employed people before 16/11/1995 is estimated based on the number of service years.

Certificate of Pension Scheme

Employee needs to complete at least 10 years of service for them to be eligible for the EPS scheme. However, employees who haven’t completed the listed years of service are not left out; as alternative has been provided for them in the form of a pension scheme certificate.

The certificate is used for the purpose of showing employee’s previous service period, in the event of a rejoining.

Forms Pertaining to the Scheme

The pension scheme prompts the usage of the following forms:

Name of the Form / who should use it? / Why is it used?

  • Form 10C Beneficiary/ Member Withdrawal benefit/Scheme Certificate
  • Form 10D Member To avail pension after the age of 58/
  • To avail pension before the age of 58 but after 50/To avail disability pension
  • Form 10D Nominee or Widower/ Widower or Children to avail family pension/to avail children or orphan pension/to avail dependent or nominee pension Life Certificate Pensioner Must be submitted by the recipients of pension or children every November. It must be submitted to the manager of pension disbursing banks.
  • Non-remarriage Certificate Widower/Widow Must is availed by the widower every year/by widow at the beginning of pension.

Either way, the form must be submitted to the manager of pension offering the pension.

 

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