Understanding EPS in the Context of Provident Funds
The term EPS stands for Employee Pension Scheme, a pension program implemented under the Employees Provident Funds and Miscellaneous Provisions Act of 1952 in India. This scheme is designed to provide financial security for employees after their retirement by offering pension benefits. Unlike just savings, EPS aims to ensure that employees have a stable and reliable source of income in their later years.
Benefits and Features of the EPS Scheme
The EPS is a generous initiative by the Indian government aimed at enhancing the retirement security of salaried employees. Employees and employers both contribute to this scheme, making it a double-edged financial aid system. The contributions are structured in such a way that they benefit both parties and ensure long-term financial stability.
While the government has enacted several pension schemes, EPS and the Employee Provident Fund (EPF) are the most popular long-term saving options. EPF is another scheme that allows employees to save money with tax benefits, but it is primarily a savings and investment avenue, whereas EPS is focused strictly on pension.
Contribution Details and Eligibility
The EPS contributions are distributed between the EPF and EPS accounts. Out of the employer’s 12% contribution, 8.33% goes into the EPS account, and the remaining 3.67% goes into the EPF account. Additionally, the employee also contributes to the EPS scheme.
Notably, the maximum contribution limit for the EPS account is Rs.1250 per month. Importantly, if an employee is already a member of the EPF scheme, they are automatically enrolled in the EPS scheme as well. This seamless integration simplifies the process for employees and ensures all necessary information is easily accessible.
Claiming Pension under EPS
To claim pension under the EPS scheme, the employee must meet certain criteria. The key requirement is to be over 50 years of age with a minimum of 10 years of service and the Scheme Certificate. For early pension, the eligibility extends to employees who are between 50 and 58 years old and have completed 10 years of service but cannot perform their job due to a permanent disability or if the employee passes away during or after service.
Employees can submit a claim for pension refund if they have completed less than 9.5 years of service. This process involves filling out form 10-C and submitting it through the employer. Alternatively, pension claims can also be made online through the EPFO website, providing a convenient solution for those who prefer digital processes.
Key Benefits of EPS
One of the primary benefits of the EPS scheme is that upon the employee’s death, family members are eligible to receive the pension. This ensures a safety net for the employee’s dependents, providing financial support even after death. Additionally, since all details are integrated under one UAN account (Unique Account Number), accessing and managing benefits becomes a straightforward process.
Another significant advantage is that employees become eligible for pension after completing 10 years of service and reaching the age of 50. This is a distinct advantage over the EPF account, which does not offer such benefits.
For those who find the formalities intimidating, detailed information can be obtained from financial advisory firms such as Sharekhan.
Understanding and fully utilizing the EPS scheme can be a crucial step towards financial security in retirement. With its straightforward contribution model and clear benefits, the EPS provides employees with a secure and predictable source of income in their later years.