Friday, 24 February 2017

Employee Pension Scheme (EPS), Contributions and Some Features

Employee Pension Scheme is also known as EPS. It is the pension scheme for the employees of the organised sector. The Pension is provided in case of retirement, disability and it is also provided to the family member or nominee in case of unfortunate death of the EPS member or the EPS pensioner. Let us talk about the contributions now,


Contribution of EPS

If you are a part of EPF that is Employee Provident Fund, 12% of your basic and DA is your contribution and as you already know even the employer matches your contribution. Now out of this employer contribution 8.33% goes to the EPS account, so here your employer is contributing and not you. Even the government contributes 1.16% of your basic and DA to your EPS account and both these contributions, that is the employer and the government contribution is limited to a maximum of 15,000 rupees in basic and DA. That is not more than 1,250 rupees is contributed by your employer and not more than 180 rupees is contributed by the government to your EPS account each month. Wherever the basic and DA is more than 15,000 rupees, the government no longer contributes and you have to fund this 1.16% of contributions from your own share. Now one of the important things to note here is that your EPS contributions do not earn any interest like your EPF contributions.

How do you become a member of EPS

Once you join an organisation providing Employee Provident Fund to its employees, you become a member of the EPS as well as employee deposit linked insurance scheme. You can opt out of EPS only at the start of your employment, but once started you cannot opt out. You have to be an EPS member if your basic and DA is less than or equal to 15,000 rupees. Once you become an EPS member, you remain a member till the age of 58 years. After that you start getting EPS pension and become a pensioner and remain no longer a member of EPS. Employers joining after the first of September 2014 and earning more than 15,000 rupees as their basic and DA cannot be a part of the EPS. An Early discounted pension can be received if you voluntarily retire after the age of 50 years and before the age of 58 years. Pension reduces by 4% for each year of early retirement, you can also defer your pension till 60 years of age for every deferred year pension increases by 4%. Let us look at the scenarios when you are entering for a pension through EPS.

First one is termed as superannuation, you receive this pension after the age of 58 years and you should have been in service for at least 10 years to receive superannuation and when you turn 58 years old and start getting this pension, you may or may not be in service.

The next type of pension is early pension which you already referred to, you can get this if you voluntarily retire between the age of 50 to 58 years and to get this you should have been in service for at least 10 years. And when you receive an early pension you should not be in any service.

Read Also:EPF vs PPF

Pension to the family members is given in case of death of an EPS member while he was in the service. And you must be an employer for at least one month. It is also given to the family members in case of death of an EPS member while he was not in the service, but was less than 58 years old and had been in service for at least 10 years. It is also given to the family members in the case of the death of the EPS pensioner. For diseased EPS member does not have a family, the nominee receives the pension and in the case where nomination is not being submitted, but the diseased have defendant parents, the father receives the pension first and then after the death of the father, mother receives a pension. Please note, family members in case of EPS includes spouse and children alone.