The Employee Pension Scheme (EPS) is designed to provide a guaranteed pension to employees after they retire. Both the employer and employee put 12 per cent of the basic salary into a special fund called the EPF. Out of the employer’s share, a small part (8.33 per cent) goes into the EPS, which is used to calculate your monthly pension when you retire. Therefore, let’s find out what will be your monthly pension with Rs 40,000 as a basic salary and 30 years of service.
What is EPS?
The Employee Pension Scheme (EPS) is a retirement-centric scheme for people working in organised sectors. If you are a member of EPF, you’re automatically part of EPS. Both employer and employee put 12 per cent of their basic salary into a fund, and a part of that goes into EPS.
What are eligibility criteria for EPS?
- You must have completed 10 years of service.
- You must have attained the age of 50 years for early pension and 58 for regular pension.
- You must be a member of the EPFO.
How does Employee Pension Scheme (EPS) contribution work?
You and your employer each put 12 per cent of your basic salary into a fund.
employer’s 12 per cent is split into two parts: 8.33 per cent goes into the Employee Pension Scheme (EPS) and 3.67 per cent goes into the Employees’ Provident Fund (EPF).
What are benefits of EPS?
It provides fixed income after retirement at the age of 58 years or after early retirement at 50 years.
Employee Pension Scheme allows withdrawal of the complete pension sum at the age of 58 years if the member leaves service 10 years before 58 years.
EPS nomination
In Eps nomination, the account holder can choose a person to receive the pension benefits from EPS. Nominees can be family members, such as a spouse, children, or dependent parents. If the member has no family, they can nominate anyone.
Under the Employee Pension Scheme, are employees the only beneficiary of the fund?
The benefit of the EPS is paid to the employee or the family of the employee, in his or her absence.
What is minimum and maximum monthly pension?
The minimum monthly pension that you will receive is Rs 1,000, and the maximum is Rs 7,500.
EPS calculation conditions
The formula for calculating the EPS pension is:
Monthly pension amount = (Pensionable Salary x Pensionable Service) / 70.
Monthly Pension Calculation: If your current age is 28, and pensionable service is 30 years
The monthly pension amount you will receive will depend on your pensionable salary and service. The average salary used in the formula is the average of your basic salary plus your DA for the last 12 months.
What will be your monthly pension?
Contributing to the (present) wage ceiling of Rs 15,000. Even if someone’s basic salary and dearness allowance is Rs 40,000, their EPS pension will be calculated at Rs 15,000 salary. Individuals may get about Rs 6,429 as a pension if the service is 30 years. (Pensionable Salary X Pensionable Service)/70 = (15,000×30)/70 = Rs 6,429.
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
