EPF Pension-Everything You Need to Know

We are all aware that PF is a retirement benefits scheme that is available to all salaried employees and guarantees you a lump sum amount when you retire. The EPF Pension scheme, however, guarantees a monthly pension amount after the retirement. What’s more,  The family of the employee also gets the pension in the event of the death of the employee.

 

The EPF pension scheme runs alongside the PF scheme, which means you are only eligible for it if you are a member of the EPF scheme. Now, every employee who draws a basic of salary Rs. 6,500 per month is compelled to make contributions towards EPF & EPS, while employees drawing basic salary over Rs. 6,501per month have an option to get PF deducted from their salary. Apart from the employee and the employee,

 

Let’s Look at How the EPS on an Employee is Arrived at:

The entire 12% of the employee’s salary goes into the EPF account. While the employer’s 12% is divided into 3.67% for EPF, 8.33% for EPS. Now, if the basic pay of an employee exceeds Rs. 6,500 per month, the contribution towards pension scheme is restricted to 8.33% of Rs. 6,500 and the balance of employer’s contribution will go into the EPF scheme. The government also contributes a 1.16% in the pension account. The maximum contribution by the government is Rs 180/month.

 

Here are a Few EPF Pension Rules You Need to Know

As per the employees pension scheme 1995:

  • You are only eligible for the employee pension scheme if you have been in service for at least 10 years
  • All contributions made to the EPS by the employee does not generate any interest.
  • You can start withdrawing EPS after you’ve attained the age of 58, however, you can opt for the reduced pension if you take an early retirement at 50 years of age
  • You can also choose to defer your pension until the age of 60. This will increase your pension amount to 4% for every deferred year.
  • You can also get the pension in an unfortunate event of complete incapacitation.

How to Calculate Pension

 

Here is a simple and most commonly used formula to calculate the pension.

(Last 12 months Basic + DA allowance *Pensionable years)/70

You can also use an EPF pension calculator available online.

What is a Pension Scheme Certificate

If an employee who was contributing to the Employee Pension Scheme exits the organization without completing the minimum service of 10 years, he/she can opt for a pension scheme certificate. This will be used to add up the previous service when the individual become employed again.