What is an Employee Pension Scheme?
Introduced in 1995 by the Indian government, the Employee Pension Scheme (EPS) is a retirement benefit plan. It focuses on providing financial independence and security to employees for their retirement years. This scheme combines compulsory savings with pension benefits for employees, as the scheme comes under the Employees’ Provident Fund (EPF) framework.
Within this structure, 12% of your basic salary is contributed by your employer, out of which 8.33% goes into the EPS, while the remaining 3.67% is credited to your EPF account. Over the years, these contributions accumulate into a retirement pool, which provides you with a monthly pension during your retirement years. What is great about EPS is that you do not need to contribute separately. It is all managed through the employer’s contributions.
Benefits of Employee Pension Scheme
The EPFO pension scheme offers several benefits aimed at providing financial security to you as an employee and your family. Here are some of the key benefits:
- If you have completed at least 10 years of service and have reached the age of 58, you become eligible for a monthly pension. This can provide you with a steady income stream and help you maintain your financial independence even after you retire.
- In case of any financial emergency, you also have the option to start your pension early, from the age of 50. But the amount you receive will be lower than the full pension.
- In case of total and permanent disability during service, you are eligible for a monthly pension irrespective of your service duration. This ensures continued financial support even if you are unable to earn.
- The scheme allows you to withdraw the accumulated amount using Form 10C if you leave service before completing 10 years. You also have the option to obtain a Scheme Certificate, which preserves your pension benefits for the future.
- The EPS scheme offers a family pension to your spouse and children in case of your unfortunate demise. When you combine the EPS scheme with life insurance, you can rest assured about your family’s well-being in your absence.
While EPS builds a foundation for retirement income, understanding basic investment process steps can help you make more informed decisions about your overall financial planning.
How to Calculate Your Pension Under EPS?
Interested in knowing how much pension you will receive under the Employee Pension Scheme? The pension amount depends on your pensionable salary and your pensionable service:
1. Pensionable Salary
A pensionable salary is calculated by taking the average salary of the last 60 months before you exit the EPS scheme. It cannot exceed ₹15,000 for a month.
If there are certain non-contributory periods in the said 60 months, you will get the benefit of those periods as well. For instance, if your salary is ₹15,000 per month, the pension calculation will still consider the full amount, even if you joined mid-month. From this, 8.33% of your salary (capped at ₹15,000) is allocated towards EPS.
2. Pensionable Service
Pensionable service is the duration for which you have rendered services to different employers. Service periods under each employer are added and taken into consideration. To avoid any errors, you should get the Scheme Certificate issued by your old employer and submit it to the new employer every time you switch jobs.
If you have completed 20 years of service, 2 years will be added as a bonus. This means that pensionable service will be equal to 22 years in this case.
Furthermore, let’s say that you have withdrawn from the EPF corpus before completing 10 years and switched jobs. In this case, the service period will be reset to zero, and you will have to restart your EPF contributions from the start.
The assessment of the pensionable service duration is done on a 6-month basis. This means that if you have been in service for 5 years and 4 months, the pension amount will be calculated on the basis of 5 years. On the other hand, if you have worked for 5 years and 7 months, the calculation will be done based on 6 years.
EPS Registration Process
While the scheme is largely managed by your employer through EPFO, you still need to activate your account and complete your details to access your account smoothly. These steps help you access your details, keep your information updated, and avoid any issues with your pension benefits in the future.
- Visit the EPFO Unified Portal, select the “For Employees” tab, and click on “Member UAN/Online Services (OCS/OTCP)”.
- Enter your registered mobile number and UAN, solve the CAPTCHA to verify your identity, and click “Request OTP.”
- Enter the OTP received on your mobile device and click “Validate OTP.” After this, you will land on the activation page.
- Once activation is completed, create a secure password between 8 and 12 characters, making sure it includes at least one uppercase letter, one number, and one special character.
- Open the “Manage” section and select “KYC” to upload your Aadhaar, PAN, and bank account details.
- Wait 3 to 5 working days for the verification process to complete and for your status to show as “Approved.”
Documents Required
Before you begin the registration process, it is best to have these documents ready so the verification process goes smoothly and there are no delays.
- Identity Proof: You will need to provide a valid identity proof, such as your Voter ID, Aadhaar Card, or Passport.
- Bank Account Documents: A copy of your bank statement, along with a cancelled cheque, is required to confirm your bank details.
- Age Proof: A birth certificate or school leaving certificate is required to confirm your date of birth.
- Death Certificate: This is required when a family member applies for a family pension.
- Relationship Proof: This document is needed when the claim is for a widow, child, or orphan pension, as proof of relationship
- Medical/Disability Proof: A certificate issued by a medical practitioner for disability-related claims.
- Employment Records: Documents such as an EPF passbook or official records to confirm your service period.
Pension Forms Under EPS
Understanding the different pension forms under EPS is essential to ensure you claim the right benefits at the right time, whether you’re withdrawing funds or applying for a monthly pension.
| Form/Certificate |
Usage |
|---|
| Form 10C |
Helps you withdraw EPS funds if you exit before completing 10 years of service, or obtain a Scheme Certificate for future benefits. |
| Form 10D |
Used to apply for a monthly pension after age 50, including benefits for widows, children, and other dependents. |
| Non-Remarriage Certificate |
A declaration confirming that the widow or widower has not remarried is required to continue receiving pension payments. |
|
EPS Eligibility Criteria: Who is Covered?
Now that you know what is EPS, EPS full form, and its benefits, you should check whether you meet the eligibility criteria. You can then create your retirement plans accordingly.
You must be a member of the EPFO (Employees’ Provident Fund Organisation).
You must have been employed for at least 10 years.
If you want to receive an early pension, you must be at least 50 years of age. On the other hand, you must have reached 58 years of age to receive a regular pension.
Your salary (basic pay + dearness allowance) should not exceed ₹15,000 per month at the time of joining the EPS.
Types of Pensions Under EPS in India
The government has included different types of pensions under the EPS scheme for different life scenarios and family structures. They are discussed below.
1. Child Pension
The child pension under the Employee Pension Scheme provides financial assistance to the children of a deceased EPS member. This pension is payable to up to two children of the deceased until they reach the age of 25. Each child is entitled to receive 25% of the widow’s pension amount. In cases where the child is disabled, the pension is extended for their lifetime.
2. Widow Pension
The Widow or Vridha pension supports the legally married spouse of the deceased EPS member and continues until the widow’s death or remarriage. The pension amount depends on the deceased member’s last drawn salary and their total years of service, with a minimum pension of ₹1,000 per month. In the case of two widows, the eldest widow is eligible for this pension.
3. Reduced Pension
Members aged between 50 and 58 years, with at least 10 years of service, can opt for this benefit. However, the pension amount is reduced by 4% for every year the pension is withdrawn early. For instance, if an individual withdraws pension at 55 years old (3 years early), they will receive pension at the rate of 88% (100% - 3*4) of the original amount.
4. Orphan Pension
The orphan pension provides financial security to children who lose both parents. Each orphan receives 75% of the widow’s pension amount. The pension is payable until the child turns 25 years old, and for disabled orphans, the benefit is extended for their entire lifetime.
Life Pension Plan
Planning for retirement goes beyond government schemes. Having a private pension plan can significantly strengthen your financial future. Kotak Life offers a range of pension plans designed to complement your EPS benefits and help you build a more comfortable retirement corpus. These plans are flexible, goal-oriented, and suited for individuals at different stages of their careers.
Some of the notable Kotak Life pension plans include:
- Kotak Assured Pension plan is a guaranteed pension plan that provides a fixed, steady income even after you retire.
- Kotak Premier Pension Plan is a traditional pension plan that helps you accumulate your earnings during your working years to later convert them into a steady pension.
- Kotak Life Confident Retirement Builder Plan is a Unit Linked Pension Plan that gives you the opportunity to earn market-linked growth with your retirement savings, also giving you the flexibility on how you invest.
Conclusion
Now that you know what an EPF pension scheme is, you must take proactive steps to avail these benefits. Start by managing your employment records, and while switching jobs, don’t forget to get your Scheme Certificate. Make sure that your nomination details are updated and regularly check your EPS contribution through the EPFO portal.
Along with this, you should also check EPF applicability under the Income Tax Act 1961 and adopt better tax-saving strategies. Making such informed financial decisions can further complement your retirement plans and ensure that you live your golden years peacefully.
FAQs on Employee Pension Scheme
1
Can I withdraw my EPS money before 10 years of service?
Yes, in such cases, you can use Form 10C to withdraw your EPS accumulations even if you leave service before completing your 10 remaining years of service. Alternatively, you can also preserve your EPS money for future use by opting for a scheme certificate.
2
What is the new “Higher Pension” rule for 2026?
Earlier, employees and pensioners were restricted by a capped ₹15,000 limit, but now, under the revised EPFO guidelines, eligible individuals can choose a higher pension based on their actual salary. Which means that you will get relatively larger monthly pensions if you make additional contributions.
3
How is my monthly pension amount calculated?
Your monthly pension is calculated by using the formula: Pensionable Salary x Pensionable Service / 70. In this formula, the pensionable salary is calculated by averaging your final 60 months’ salary, capped at ₹15000, while your pensionable service is the total number of years you worked.
4
Can I withdraw my EPS money before I retire?
You cannot make a partial withdrawal from EPS like you can with EPF. However, you can withdraw the lump sum amount using the Form 10C if your total service is less than 10 years.
