EPS - Employee Pension Scheme | Types, Eligibility and How to Calculate EPS

Planning for retirement is a key part of financial security for salaried workers. The Employees’ Pension Scheme (EPS) is a government-backed pension scheme in India managed by the Employees’ Provident Fund Organisation (EPFO) that provides a regular monthly pension to eligible subscribers.

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What is EPS?

EPS was introduced by the EPFO in 1995 (hence often called EPS-95) as a social security measure for employees in the organised sector who are covered by the EPF scheme.

Under EPS:

• The employer (not the employee) contributes 8.33% of the employee’s salary (basic + dearness allowance) into the pension fund (subject to a ceiling) and the government contributes 1.16% (in many cases).
• Based on your pensionable salary (capped amount) and years of service, you become eligible to receive a monthly pension after meeting certain criteria.

Thus, EPS is essentially a pension (monthly) benefit not just a lump sum targeted at long-term service employees.

Eligibility: Who qualifies and under what conditions

To avail pension under EPS, you should satisfy the following important conditions:

• You must be a member of EPFO (your employer must be covered under the EPF & MP Act).
• You must have completed a minimum pensionable service of 10 years (i.e., you should have contributed under EPS for at least 10 years) in most cases.
• You reach the pension age: generally 58 years for full pension. Early pension may be available from age 50 with reduced benefit.
• The pensionable salary for calculation is capped (often ₹15,000 per month) as per current rules.

Special cases:

• If you become totally and permanently disabled during service, you may qualify for pension even if you haven’t completed 10 years service.
• If the member dies in service (after a minimum contribution), the family (widow/widower/children) may be eligible for family pension.

Types of pensions under EPS

Under the scheme there are several types of pension benefits offered:

• Superannuation (Regular) Pension: Pension begins when you reach age 58 (with minimum 10 years service) and retire.
• Early Pension: If you opt out or retire between age 50 and 58, with at least 10 years of service, you can get early pension. The pension amount will be reduced by 4% for each year you retire early.
• Disability Pension: If you suffer total and permanent disability during your employment, you may receive pension irrespective of service years.
• Family/Survivor Pension: On death of the member in service or after pension commencement, widow/widower/children may receive monthly pension.

How to Calculate Your EPS Pension

The pension amount under EPS is calculated using a standard formula:

Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Where:

• Pensionable Salary = The average of your last 60 months (5 years) basic salary + dearness allowance before exit/joining pension, up to a maximum ceiling (currently ₹15,000) per month.
• Pensionable Service = Total years of service (rounded off) during which pension contributions were made. As per rules, 6 months or more service may be rounded up to next year.

Example: If your pensionable salary = ₹15,000 and pensionable service = 25 years, then:
Monthly Pension = (15,000 × 25) ÷ 70 = ₹ 5,357 approx.

Notes:

• There is a minimum pension guaranteed under EPS (for example ₹1,000 per month) subject to compliance.
• If you retire early (say at 55 years) instead of 58, your pension will reduce by 4% for each year short.
• If you defer taking pension beyond 58 (say up to age 60), you may get a bonus (e.g., 4% per year) for each deferral year.

Key Features & Benefits

Here are some of the advantages of EPS:

• Provides a regular monthly pension after retirement or in disability/survivor situations, helping long-term income security.
• Backed by government via EPFO, so relatively secure.
• Allows portability: Even if you change employers, your service gets aggregated (via UAN) for pension calculations.
• Has special benefits for families: child pension, widow pension, orphan pension under certain conditions.

Things to Keep in Mind / Limitations

• The pensionable salary is capped, meaning if your basic salary + DA is more than the ceiling (₹15,000), it won’t increase your EPS pension beyond that cap.
• You must complete at least 10 years of pensionable service to get full pension, otherwise you may only get withdrawal benefit, not monthly pension.
• Pension for early retirement will be reduced for each year short of 58 years.
• If you withdraw your EPS benefits (or EPF) before qualifying, you may lose the pension rights.
• It is a defined-benefit model with formula based on capped salary, it may not keep pace with actual salary growth beyond cap so you may need additional retirement savings.

Summary

The Employees’ Pension Scheme (EPS) is an important retirement-income scheme for employees covered by EPFO. If you fulfil eligibility (especially being EPFO member, completing 10 years of service and reaching age 58), you can receive a regular pension calculated as (Pensionable Salary × Service) ÷ 70. While the scheme gives valuable long-term security, note the salary cap, service requirement and formula-based benefit you may also want to supplement it with other retirement savings.