EPS 95 Pension Scheme: Calculation, Formula, Eligibility, Benefits

In India, there are multiple pension schemes available for securing the future of employees in their old age. Employee Provident Fund Organisation mostly looks after this system to ensure that employees receive a pension as soon as they turn 58. However, both employees and employers need to contribute to building the corpus for getting a pension in future. Keep reading to find out all you need to know about EPS 95 pension scheme. 

What Is EPS 95 Pension Scheme?

EPS 95, or Employee Pension Scheme 1995, is a social security scheme that was launched by the Employees’ Provident Fund Organisation on November 19^th 1995. This scheme provides pension benefits after retirement to employees working in the organised sector. EPFO administers the system and assures that employees who have reached the age of 58 will receive a pension.

The benefits of this scheme are available to both existing as well as new EPF members. Both the contracting parties, which include the employee and employer, contribute 12% of the employee’s wage, including the basic salary and dearness allowance (DA), to the EPF. Every month, an employee's entire contribution is made to the EPF. On the other hand, 8.33% of the employer’s contribution goes to the Employees’ Pension Scheme, and the remaining 3.67% goes to the Employees’ Provident Fund. 

EPS 95 Minimum Pension 

No matter how much you contribute towards the Employee Pension Scheme, there is a minimum range of pensions set by the Government of India. Employees will receive this amount irrespective of how much you contribute. 

Under this scheme, the government offers a fixed minimum pension ranging from Rs.1,000 to Rs.2,000 monthly to pensioners. This was started by the government on September 1st, 2014, along with providing additional budgetary support to the EPF scheme. 

Other than the contribution of the employee and employer, the Government offers budgetary support of 1.16% of the wages of each employee to the Employees’ Provident Fund Scheme. This added support from the Government will be up to a maximum of Rs.15,000 every month.

EPS 95 Pension Latest News 

As per a press release issued on May 3rd, 2023, by the Ministry of Labour & Employment, employees opting for a higher EPS pension will not have to contribute to it. The additional 1.16% of the salary they would have to pay from above the wage ceiling will now be drawn from the 12% of the employer's contribution. This decision has been taken as per the announcement of the Supreme Court to devise a replacement methodology.

Along with this, the deadline to apply for a higher pension has been extended to June 26^th 2023. According to the current pension calculation method under EPS 95, your pension will depend on the total length of service and average basic salary in the last 5 years. Therefore, the longer your service period, the more you will benefit from the pension rule.

EPS 95 Pension Eligibility

 In order to opt for the benefits of EPS 95, you need to fulfil the following eligibility criteria:

• You need to be a member of the EPFO.
• You need to serve a minimum of 10 years in the service.
• The retirement age for a regular pension is 58 years. If you retire earlier, you can also get a pension at a reduced rate.
• In case you are willing to receive your pension from the age of 60, you will get an additional 4% every year.
• If you have not completed 10 years of service, but more than 6 months, then you are eligible to withdraw your EPS amount if you are unemployed for more than 2 months.
• In case an employee becomes disabled totally as well as permanently, then he/she would be eligible for a monthly pension. He/she will receive a monthly pension even if they have not served for the pensionable service period. However, the employee has to undergo a medical test to confirm whether they are unfit for fulfilling the job role due to their disability.
• Family members of an employee also might be eligible for pension benefits in case the employee passes away while in service.

EPS 95 Pension Rules 

Following is a list of rules in relation to the Employee Pension Scheme 95:

• Employees who earn Rs.15,000 or less every month need to mandatorily enrol under this scheme. 
• The employer needs to contribute within 15 days of the closing of every month.
• If after the death of an employee, their widow or widower remarries, then the children will receive the pension.
• Contribution made by the employee contains components of basic salary, dearness allowance, admissible cash value of food concessions and retaining allowance.
• In case you wish to transfer EPS online, you can do so using a composite claim form.
• A family member of the EPFO member can avail the benefit of EPS by submitting a number of forms. Form 10C is for withdrawal before the completion of 10 years of service. In case of monthly pension withdrawal after the age of 50 years, a member needs to fill up Form 10D. To declare that the widow has not remarried, one needs to get a Non-Remarriage certificate. A life certificate is needed so as to certify that the employee is alive.
• In order to check the amount accumulated in the EPS account, you can check the EPF passbook. You can download it from the EPF passbook portal. The last column of the passbook will show the monthly contribution to the account.
• In case you are switching jobs, you need to fill up Form 11 as well as Form 13 and submit them. However, in case you have an existing Universal Account Number (UAN) and you have used Aadhaar as your KYC in the EPF database, submitting only Form 11 will do. Form 11 certifies that you are a member of the EPF scheme, while Form 13 is used to move your PF balance from your previous company to the new one.

How Is EPS 95 Pension Calculated?

The monthly pension amount an employee receives depends on the pensionable service of the employee and pensionable salary. 

Here is the formula for calculating any member employee’s monthly pension income:

Member’s Monthly Pension = (Pensionable salary x Pensionable Service)/70

• Pensionable Salary

It is the average monthly salary that an employee receives in the last 60 months before they decide to exit the Employees’ Pension Scheme. This is as per the judgement of the Supreme Court on November 4^th 2022. Earlier, it was the average monthly salary of the last 12 months of the employee’s participation in the scheme.

• Pensionable Service

This refers to the total number of years for which contributions were made to the EPS account. According to the law, pensionable service must be rounded off to the nearest year. This means that in case you serve for 6 months or more, then it will be treated as a year. If it is less than 6 months, the year will not be counted. If you superannuate at the age of 58 years and have served for more than 20 years, then your service tenure will be increased by 2 years. 

Benefits Of EPS 95 Pension

Employees who are eligible for EPS pension can avail a number of benefits. Let us take a look at them:

• Pension From the Age of 58

An EPS member becomes eligible for a pension from the age of 58 as soon as they retire. However, to become eligible for getting a pension, they need to compulsorily contribute for 10 years before turning 58. After retirement, they will receive an EPS pension scheme certificate. This certificate is a must for filling up form 10D to withdraw monthly pension.

• Pension in Case of Disability

In case a member of EPS becomes disabled completely as well as permanently, then they will receive a monthly pension. This is irrespective of whether they have served for the pensionable period or not. This member will receive a pension starting from the date of permanent disability and for their entire life. 

The employer must deposit funds in this person’s EPS account for at least a month to become eligible for a pension. However, the employee will have to undergo a medical test to prove the fact that they are unfit for the job that they did before becoming disabled.

• Pension in Case of Employee’s Death

An EPS member’s family will receive family pension benefits in case of death of the employee under 3 circumstances:

1. If a member completes 10 years of service and dies before the age of 58 years.
2. In case a member dies after they start receiving a monthly pension.
3. If a member dies while still serving and the employer has at least once deposited funds into their EPS account.

• Withdrawal Facility Before Becoming Eligible for Monthly Pension

In case a member of EPS is unable to remain in service for 10 years due to some reason and reaches the age of 58, they can withdraw the entire some they have invested by filling up form 10C. However, in this case, they will not receive any monthly pension.

Final Word

There are various types of pensions under EPS 95. These are widow pension, orphan pension, child pension and reduced pension. Therefore, the Employee Pension Scheme is a great instrument for depositing your money so that you can use it for different purposes in the future. Apart from that, it is a great tax-saving tool. 

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