Sunday, 26 February 2017

Withdrawal Benefits of Employee Pension Scheme (EPS)

Let us discuss about the situation, why can withdraw your pension benefit and how to calculate your pension. So let us look at the withdrawal of the pension benefit. For calculation of your service period a tenure of less than 6 months is rounded off to 0 and a tenner more than or equal to six months is rounded off to 1. For example, if your service period is 9 years and 6 months, it is rounded off to 10 years and if your service period is 9 years and five months, it is rounded off to 9 years.


Withdrawal of the Pension Benefit

Pension benefit withdrawal is possible if total employment is less than 9 years and 6 months and your age is less than 50 years. It is also possible if you attain the age of 58 years, but your total employment is less than 9 years and six months. It is also possible by the family members of a deceased EPS member who was dying after the age of 58 years, but his total employment is less than 9 years and six months. Now what is the amount that you get on withdrawal? The table that you see in front of you is used for calculation of the withdrawn amount.

Years of Service
Proportion of Wages

The table has a number of years of service and a corresponding factor. This factor is multiplied by your basic and DA and this is the amount that you get on withdrawal. Let us assume as a person A is completed 9 years of service and wants to retire and hence wants to withdraw his EPS contribution. And his retirement is basic and DA let us assume as 25,000 rupees. Since the wage sealing for calculation of EPS is 15,000 rupees, we will calculate based on 15,000 rupees. From the table the factor corresponding to 9 years of service is 9.33. So 15,000 multiplied by 9.33 gives as 1,39,950 rupees. This is the amount Mr. A would get on withdrawal of EPS after completion of 9 years.

You cannot withdraw your EPS benefit, but would get a scheme certificate if you have completed not more than 180 days of employment or if completed 10 years of service, but at below the age of 50 years or if you are between 50 and 58 years you voluntarily retired but you don't want to go for reduced pension. And you have not completed 9 years and 6 months of your employment and do not want to withdraw your EPS contribution. This scheme certificate indicates pensionable service, pensionable salary and the amount of pension due on the date of exit from employment. This certificate can be submitted to your new employer if you want to continue with your EPS account or if you do not join any other organizations. The scheme certificate can be used to withdraw your contributions or to get pension depending upon your case.

Minimum pension that you can get is 1000 rupees per month and the maximum pension is 7,500 rupees per month. Maximum tenure that can be used for calculation of your pension is 35 years and one can get only one pension. So in case you have multiple scheme certificates as you worked with multiple organizations. You need to submit them all so that you can get only one pension.

Read: Features of Employee Pension Scheme, Understanding Your Financial Status

The formula used for pension calculation is the average salary multiplied by a pensionable service, all of this divided by 70 where the average salary is the average of salary drawn in the last 12 months of your employment. Pensionable service is the number of years of service after the 15th of November 1995. For people who are in service before the 16th of November 1995 the formula is different. Based upon this formula if we take the average salary as 15,000 which is the maximum allowed for EPS calculations and take the maximum tenure that is 35 years, divide this by 70, we get the maximum pension that is allowing 7,500 rupees. So you see pension that you get through EPS are dependent upon the average salary withdrawn in the last 12 months of employment and the duration of your service. It is not dependent upon the contributions you made and as you already know the contributions are also limited to a certain figure. And not to forget that your EPS pension is taxable as it is considered under the head of income from salary.