Employees Pension Scheme,

1995

DR. PAYAL JAIN

ASSISTANT PROFESSOR, VIPS
The Employees Pension scheme was introduced
by the Govt. of India in November 1995. It
replaced the Family Pension Scheme 1971 which
provide benefits to the only family members of
the deceased person.
The Employees Pension Scheme or the EPF
pension scheme was launched in the year 1995.
The beneficiaries of the Miscellaneous Provision Act
of 1952 and the Employees Provident Fund
automatically fall under the eligibility list of the EPS
scheme.
Unlike the contribution in EPF, the pension
contribution in EPF is not shared by the employees
and employers. Only 8.33% from the employers’
share of 12% goes to EPS pension.
 Eligibility Criteria for Employees
Pension Scheme
The following individuals are considered eligible
to receive a pension under the Employees
Pension scheme 1995.
• Should be a member of the Employees’
Provident Fund Organization.
• Should have been in the service for 10 years,
not necessarily continuously.
• Should be 50-58 years old.
 Benefits of EPF pension
Financial assistance after retirement: The
monthly pension generated under the EPS
scheme acts as a source of regular income after
retirement. Thus it provides financial support to
the retired individuals, provided the minimum
pensionable service span has been served.
Pre-mature withdrawal: The eligible age for
receiving the EPF pension scheme is 58 years;
however, there is some concession on the age
limit for pre-mature withdrawal. Employees can
opt for pre-mature withdrawal at the age of 50;
however, at a lower rate and there will be no
pension benefits after retirement.
Pension for disable: Pension is generated
irrespective of the completion of the
pensionable service span, in case of partial or
complete disablement. The pension generation
starts from the day of disablement and
continuous for a lifetime. A medical check-up
might be arranged before generating the
pension.
Transferable: At the demise of the employee,
the pension benefit is transferred to a family
member.
 Types of Pensions under Employees’
Pension Scheme
Widow pension: After the demise of the
employee, the spouse of the employee becomes
eligible for widow pension under
the EPF pension scheme. The widow will receive
pensions until remarriage or death. The pension
amount for widows is decided based on the
pension amount of the member employee. The
minimum amount under the widow pension is ₹
1,000.
Child pension: The Employee Pension scheme
generates the child pension to the surviving
child of the deceased employee. The maximum
amount that can be generated as a child pension
is 25% of the widow pension. The child will
receive the pension until he or she reaches the
age of 25. Point to remember is that the child
pension is generated along with the widow
pension.
Orphan pension: If the employee is deceased
and there is no surviving widow, the surviving
children will become eligible for the orphan
pension. The orphan pension will be a maximum
of 75% of the widow pension.
Reduced pension: If a member employee
decides to withdraw the pension before
reaching the age of 58, he or she will receive the
pension at a reduced rate of 4% per year. This is
termed as the reduced pension. However, the
employee must be 50 years old to be eligible for
a reduced pension, and once the employee
reaches the age of 58, the pension will start
generating at the standard rate.
 Calculation
The monthly pension amount under the
Employees Pension Scheme is decided based on
the pensionable salary and the pensionable
service period of the member employee. The
amount can be computed using the below-
mentioned formula.
Pensionable salary (annual) * Pensionable
Service (in years) / 70 = monthly EPS pension
• All contributions made in the Employees’
Pension Scheme (EPS) account are to be done
by the employer
• The employer makes a contribution
of 8.33% of the employee’s pay for EPS
• The employee’s pay consists of basic wages
with dearness allowance, retaining allowance
and admissible cash value of food
concessions.
• The employer has to make the contribution
within 15 days of close of every month
• All applicable contribution cost has to be
borne by the employer
• The principal employer has to make the
contributions for all employees working for
him directly or under a contractor
• The minimum service period is 10 years to be
eligible for availing pension benefits.
• If you have completed less than 10 years service.
but more than 6 months’ service, you can
withdraw the EPS amount on being unemployed
for more than two months.
• As per the scheme, the retirement age of the
person is fixed at 58 years of age
• An employee ceases to be a member of the
Pension Fund after reaching the age of 58 or from
the time he starts availing reduced pension (at
the age 50).