EPS 95 Pension Scheme: A Complete Guide

Introduction 

The Employee Pension Scheme (EPS) 95, established by the Government of India in 1995, is a vital social security initiative designed to offer financial stability to employees after their retirement. Managed by the Employees’ Provident Fund Organisation (EPFO), the scheme ensures that workers in the organized sector can continue receiving a steady income during their later years. While the scheme was introduced with the goal of providing pension benefits for long-serving employees, it has evolved over time to accommodate the growing needs of India’s workforce.

The EPS 95 Pension Scheme is particularly significant in a country like India, where a large proportion of the population relies on their employment earnings to meet daily financial needs. Upon retirement, employees need a reliable source of income, and the EPS 95 serves that purpose by ensuring that their post-retirement years are not financially challenging. Additionally, the scheme provides benefits to the family members of deceased employees, ensuring a safety net for loved ones left behind.

This guide will walk you through everything you need to know about the EPS 95 Pension Scheme, from its core features and eligibility criteria to how the pension is calculated and how you can claim your benefits. Whether you’re nearing retirement or just starting your career, understanding the EPS 95 scheme is crucial for ensuring a secure financial future.

What is the EPS 95 Pension Scheme?

The EPS 95 Pension Scheme is a retirement benefit plan introduced by the Government of India under the EPFO. The scheme is specifically designed to provide pension benefits to employees in the organized sector. It ensures a stable income source for employees post-retirement, supporting their financial needs.

Employees who are members of the Employees’ Provident Fund (EPF) automatically become eligible for the EPS 95 Scheme.

Eligibility Criteria for the EPS 95 Scheme

To avail of the benefits of the EPS 95 Pension Scheme, employees must meet the following eligibility criteria:

1. Membership in EPFO: The employee must be a member of the EPF.
2. Minimum Service Period: A minimum of 10 years of service is required to claim pension benefits.
3. Age Criteria:
   • The pension is typically available upon reaching 58 years of age.
   • Employees can opt for an early pension from the age of 50, with a reduction in the pension amount.
4. Contribution Requirement: Contributions to the scheme should be made consistently during the employment tenure.

Key Features of the EPS 95 Pension Scheme

The main characteristics of the EPS 95 Pension Scheme are:

1. Monthly Pension: Provides a fixed monthly pension to eligible employees post-retirement.
2. Family Pension: Offers a family pension in case of the death of a member, ensuring financial security for the family.
3. Minimum Pension Guarantee: Ensures a minimum pension of ₹1,000 per month.
4. Early Pension: Allows employees to opt for pension benefits from the age of 50, albeit with a reduction.
5. Lifetime Pension: Benefits continue for the lifetime of the member, and after their demise, the family or nominees are entitled to receive the pension.

Benefits of the EPS 95 Pension Scheme for Employees

The EPS 95 Pension Scheme offers employees the following advantages:

1. Financial Security: Guarantees a steady income post-retirement.
2. Family Coverage: Provides financial support to the family in case of the member’s death.
3. Tax Benefits: Contributions to the EPS 95 scheme are eligible for tax deductions under Section 80C of the Income Tax Act.
4. Social Security: Ensures economic stability during old age, mitigating financial stress.

Contribution Structure Under EPS 95

The contribution to the EPS 95 Pension Scheme is made jointly by the employer and the employee through the EPF account:

• Employer’s Contribution: Out of the 12% of the basic salary contributed by the employer towards EPF, 8.33% is diverted to EPS.
• Employee’s Contribution: Employees do not make a direct contribution to the EPS 95 scheme; their contribution goes entirely to the EPF account.

The maximum salary considered for EPS contribution is ₹15,000 per month. If the salary exceeds ₹15,000, the contribution is calculated based on this capped amount.

How to Calculate Pension Under EPS 95

The pension amount under the EPS 95 pension scheme is calculated using the following formula:

Monthly Pension=Pensionable Salary×Pensionable Service/70

• Pensionable Salary: The average monthly salary for the last 60 months of service.
• Pensionable Service: The total years of service rendered by the employee.

For example, if your pensionable salary is ₹15,000 and you have 25 years of service:

Monthly Pension=15,000×25 / 70=₹5,357.14

Steps to Claim Pension Benefits

The procedures for requesting pension benefits are as follows:

1. Fill out Form 10D: Submit Form 10D to apply for pension benefits.
2. Attach Necessary Documents: Include required documents like age proof, service certificate, and bank account details.
3. Submit to EPFO: Apply to the respective EPFO office or through the online portal.
4. Track Application: Use the EPFO portal to track the status of your application.

For family pensions, Form 10C needs to be submitted by the nominee or family members.

Limitations and Challenges of the EPS 95 Pension Scheme

The EPS 95 Pension Scheme has the following drawbacks and difficulties:

1. Low Pension Amount: The capped salary of ₹15,000 results in relatively low pension amounts for employees.
2. Lack of Awareness: Many employees are unaware of the benefits and procedures related to the EPS 95 scheme.
3. Limited Flexibility: Contributions and benefits are tightly regulated, leaving little room for customization.
4. Inflation Impact: The pension amount may not be sufficient to meet rising living costs due to inflation.

Recent Updates and Changes in the EPS 95 Scheme

1. Higher Pension Option: The EPFO has allowed employees to opt for a higher pension based on actual salary, overriding the ₹15,000 cap. This applies to employees who exercised the joint declaration with employers before the deadline.
2. Digital Process Enhancements: EPFO has streamlined online applications for claiming pension benefits, reducing procedural delays.
3. Increased Awareness Campaigns: Government initiatives aim to educate employees about the scheme’s features and benefits.

Conclusion

The EPS 95 Pension Scheme is a vital pillar of social security for employees in India, ensuring financial stability post-retirement. While it has its limitations, recent updates have made the scheme more accessible and beneficial. Employees are encouraged to understand their entitlements and plan their retirement effectively.

If you are eligible for the scheme, ensure you complete the necessary procedures to claim your benefits. To secure your post-retirement life, Contact Registerkaro and take the first step towards financial independence.

Frequently Asked Questions (FAQs)

1. What is the minimum pension under the EPS 95 scheme?
The minimum pension guaranteed under the scheme is ₹1,000 per month.

2. Can I withdraw my EPS 95 contribution before retirement?
Yes, you can withdraw the EPS contribution if you have less than 10 years of service.

3. How is the pension amount calculated?
The pension is calculated based on your pensionable salary and total years of service using the formula:

Monthly Pension=Pensionable Salary×Pensionable Service70\text{Monthly Pension} = \frac{\text{Pensionable Salary} \times \text{Pensionable Service}}{70}

4. What is the process for claiming a family pension?
The nominee or family member must submit Form 10C, along with the required documents, to the EPFO office.

5. Are there any tax benefits under the EPS 95 scheme?
Yes, contributions to EPS 95 are eligible for tax benefits under Section 80C of the Income Tax Act.