EPFO: Employee Pension Scheme benefits, EPS payout calculation, rules, features and key FAQs, explained

The Employees’ Provident Fund Organisation (EPFO) provides pension benefit for all subscribers who have an account with it for more than 10 years. This is because of the 12% employer contribution to your EPF account, 8.33% is directed towards a pension fund administered by retirement body.

At time of retirement, members can withdraw their PF amount in full and maintain annuity in the pension scheme by availing a Scheme Certificate (i.e. by submitting Form 10C).

According to the Employees’ Pension Scheme 1995 (EPS 1995), all EPF members are eligible for pension when they reach 58 years of age. You can also choose to delay pension payments till you reach 60 years of age, by choosing to, either:

• Pause contributions for two years (lumpsum earns 4% p.a. interest till 60 years, no interest after) or
• Continue contributions for two years (higher accumulated amount means higher final payout).

EPS benefits and key features, explained

According to the official website, EPS 1995 provides pensionary benefits to eligible employees of establishments covered under Section 6A of the EPF and MP Act, 1952. The scheme ensures monthly pension on superannuation, early retirement, permanent disability, and offers family pension in case of member’s demise.

• The contribution is divided two-way: Employers contribute 8.33% of wages and the Centre contributes 1.16% (subject to wage ceiling) towards the fund.
• Membership: Membership is compulsory for eligible employees (generally those with EPF membership) and continues until 58 years, death, or pension settlement.
• Duties of Employer and Contractors: Employers must enroll all eligible employees, deduct contributions, and deposit them with EPFO. They are responsible for timely submission of returns, records, and details of members. Further, contractors engaging workers are equally bound to ensure contributions and compliance.

• Disbursement rules: Pension is disbursed monthly to eligible members or beneficiaries (through banks / post offices). This includes superannuation pension, early pension, family pension, orphan / widow pension, and disablement pension. Notably, disbursement ensured even if employer defaults, as EPFO guarantees benefit once membership conditions are met.
• Exemption: Establishments offering pension benefits equal to or better than EPS-95 can seek exemption.

Employees’ Pension Scheme — Top FAQs answered

Who is eligible for EPS benefits? Employees earning up to ₹15,000/month and contributing under EPF for a minimum period (10 years of service) are eligible. Notably, disability pension is available without the 10 years of service requirement.

Who is covered under EPS? It covers all employees in factories and establishments, past members of ceased Family Pension Scheme, 1971; and employees who worked between 1 April 1993 to 15 November 1995.

How is the pension amount calculated? The formula for calculation is: Pension = (Pensionable Salary (average of last 60 months) x Pensionable Service) / 70.

Thus, a member who joins at 23 years and superannuates 58 years old, and contributing to the wage ceiling of ₹15,000 may receive around ₹7,500 per month as pension for 35 years of service — (15,000 x 35) / 70 = 7,500

What are the benefits of the scheme? Members get monthly superannuation pension, family pension, disablement pension, withdrawal benefit and minimum pension guarantee.

What benefits exist on death or disability? Widow / widower pension, children pension, disablement pension, and survivor benefits are available.

Can pension be drawn before retirement? Yes, a reduced pension can be drawn from age 50 subject to conditions.

Who can claim pension if no nominee exists? It is payable to the dependent parents.

What certificates must pensioners submit regularly? All pensioners drawing pension under EPS 1995 are required to give a life / non-remarriage certificate, duly attested by a bank manager / Gazetted officer after 12 months from the month in which the pension was sanctioned or date of submission of last Life certificate.

Physical Life Certificate is to be submitted to the bank through which the pension is being paid. Failure to submit Life Certificate after one year will result in stoppage of pension after 12 months from the date of submission of last Life Certificate or sanction of pension in case of new Pensioners.

In place of physical life certificate ‘Digital Life Certificate’ (DLC) has been introduced since FY16 and pensioners can use their Aadhaar number to submit the DLC. The facility to submit DLC is available in ‘Common Service Centers’ (CSCs), branches of Pension Disbursing Banks, post offices’ across India and the PF offices.

Disclaimer: This story is for educational purposes only. We advise investors to check with certified experts before making any investment decisions.