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The Employees’ Provident Fund offers a monthly pension from the age of 58 to provide regular cash flow apart from the lump sum that it gives at the time of retirement.
The Employee Pension Scheme, or EPS, is an integral part of EPF that waa sintroduced in 1995. (Picture Credit: depositphotos)
Legislated in 1952, just about 2 years and 5 months after the Constitution was adopted, the Employees’ Provident Fund, or EPF, is India’s earliest social welfare scheme for blue and white-collar employees. However, whenever EPF is discussed, the one-time lump sum that it generates comes up. However, it is not the only benefit that EPF gives to contributors.
From the age of 58, EPF also pays a monthly pension. It is popularly known as EPS or Employee Pension Scheme. Like EPF EPS is also managed and paid by Employees’ Provident Fund Organisation or EPFO. It was introduced in November 19, 1995.
Formula to calculate EPS
There is a simple formula to calculate the monthly pension under EPS. The formula is: pension = (average of last 60 months) X pensionable service)/70. To use this formula one needs to understand what the terms contained in the formula mean. The term “pensionable salary” means the sum of your basic pay and dearness allowance earned in the last 60 months. The term “pensionable service” means the total number of years the individual has worked.
Who is eligible for EPS
In order to be eligible for Employee Pension Scheme or EPS one must complete at least 10 years in service. Usually, the pension starts from the age of 58 years. However, one can claim early pension from the age of 50 years.
But there is a catch. For every year an individual claims early pension, the amount would go down by 4%. In other words, if one is eligible for a monthly pension of Rs 5,000 at the age of 58, if he/she claims it at 57, only Rs 96 would be paid a month.
Additional pension in EPS
The converse is also true. If he/she defers pension by 1 year and claims it at 59, he/she would get extra 4%. If claimed at 60, it would become Rs 100 + 4% + 4%. There are a few types of pension under EPS. These are widow pension, orphan pension and child pension apart from the normal superannuation pension.
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