Kolkata: The Employees’ Pension Scheme is popularly referred to as EPS in short. It is the second part of the Employees’ Provident Fund, or EPF, which is the oldest social security scheme for employees in the formal sector. Therefore, anyone who is a member of the EPFO (Employees Provident Fund Organisation) will automatically become a possible receiver of EPS.
Since it is a pension, it is paid monthly to an employee after retirement, subject to certain conditions. There is a minimum and maximum amount that one can get under EPS. It is a government-backed plan and, therefore, safe. A significant point about EPS is that the family of an employee will get the pension after the death of the employee. An employee has the freedom to choose who will get the pension in his/her absence. If the employee doesn’t have a family. he/she can nominate anyone, but if he/she has a family, a family member has to be named as the beneficiary.
Pension formula
The amount of pension that one gets a month is governed by a formula. It is: (Pensionable Salary x Pensionable Service) / 70. It is clear from this formula that the amount depends on two variables pensionable salary and pensionable service. Obviously these two terms will very from individual to individual, and, therefore, the amount of pension will be different for different employees.
However, here is a catch. The pensionable salary is capped at Rs 15,000. Even if an employee’s salary is higher than Rs 15,000, the figure of the ceiling ie, Rs 15,000 will be considered. Now, let’s consider the pension amount for one who has worked for 25 years.
The EPS calculation
(Pensionable Salary X Pensionable Service)/70 = (15,000×25)/70 = Rs 5,357. Therefore, one who has worked for 25 years can hope to get about Rs 5,357 very month as pension. Using the same formula, it is fund that the pension an employee, who has worked for 30 years, is supposed to get is Rs 6,428.
What is minimum EPS pension
The minimum EPS pension is Rs 1,000 while the maximum EPS pension that one can hope for is Rs 7,500. However, one needs to keep a few points in mind about EPS. One cannot get any pension unless one has completed 10 years of service. The minimum age when one can get a monthly pension from EPFO is 50 years. The regular pension is available from 58 years. Also, for every year one claims EPS pension earlier than 58 years, it declines by 4%. Conversely, if one claims it every years after 58, it increases by 4%. But one will be get the pension from the age 60, when the amount will be 8% more than what he/she would get at 58 years.
Another point to remember is that the contribution to EPS goes from the amount of money that comes from the employer. Of the 12% contribution by the employer, 8.33% goes to the Employees’ Pension Scheme, while the rest 3.67% accrues to the EPF account. The 12% contribution from the employee goes totally to the EPF kitty, which is paid as a lump sum to the employee when he/she retires from service.
EPS, or Employee Pension Scheme (EPS) is the part of a two-fold retirement plan for any employee of India’s organised sector. Any person who has Employee’s Provident Fund (EPF), can get a pension from the same body that pays EPF. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
