The Employees' Provident Fund Organisation administers the Employees' Pension Scheme (EPS), formally known as the Employees' Provident Fund Pension (EPFO). Employees in the organised sector can look forward to receiving a pension when they reach the age of 58 under this plan.
Overview:
Only employees with at least 10 years of service are eligible for the program’s benefits (this does not have to be continuous service). In 1995, the Employee Retirement Income Security Act (EPS) was enacted, which allowed both current and new EPF Pension calculator members to participate in the program.
Employer and employee contributions to the Employee Retirement Income Security Act are each equal to 12% of the employee’s pay (ERISA). Employers contribute 8.33% to EPS (Employee Retirement Scheme). Employee contributions are a total of 3.67% of their portion of EPF contributions monthly.
Eligible Criteria for EPS
PF Pension Scheme – If you want to take advantage of the Employees’ Pension Scheme (EPS), you must meet the following requirements:
- EPFO should accept him as a member
- He should have served a minimum of ten years
- The 58-year-old man has passed away
- From the age of 50, he will be able to take a reduced amount of his EPS as a lump sum
- He has the option of delaying his pension for up to two years (until he becomes 60), during which time he will get an additional 4% annual pension.
Types of PF Pension
Pensions for widows, children, and orphans can be found under the EPS program. The EPF subscriber’s family member receives an income from these pensions.
Use Vakilsearch’s EPF Calculator India to find out how much money you have left in your EPF account before you retire.
- The Widow’s Retirement Plan: The widow of a pension-eligible member may be entitled to a widow pension, also known as a Vridha pension. Pension payments will continue in the event of the widow’s demise or remarriage. If numerous widows exist, the annuity will be paid to the eldest widow. Table C of the EPS, 1995 specifies the maximum monthly Vridha pension that can be obtained. Effective immediately, the minimum pension is now fixed. The widow pension is calculated using the following table and the pensionable wage of ₹ 6,500 for member pensioners. A new monthly pensionable pay of ₹ 15,000 is now in effect.
- Child Pension: In the event of a member’s death, surviving children get a monthly children’s pension in addition to the monthly widow’s benefit. As long as the child is under 25 years of age, the monthly pension will be paid to him or her. The greatest amount that can be paid is 25% of the widow’s pension.
Vakilsearch offers a retirement planning calculator that can assist you in estimating the amount of funds you’ll require to secure your post-retirement life, manage your expenses, and achieve your desired lifestyle.
- Orphan Pension: The orphan pension, equal to 75% of the monthly widow pension, is payable to the deceased member’s children if he or she dies without a surviving spouse. There will be two beneficiaries, one for each child who has survived to adulthood.
- Reductions in Pensions: A member of the EPFO who has worked for ten years and attained the age of 50 before turning 58 is entitled for an early epf pension calculator. In this scenario, the pension amount is lowered by 4% for each year the individual is younger than 58. He will receive his decreased monthly pension at a rate of 92% (100% divided by two x four) when he retires at age 56 years old.
Importance of PF Pension: Facts to Consider
The employer is responsible for making all contributions to the Employees’ Pension Scheme (EPS).
- EPS is funded in part by the employer, who contributes 8.33% of the employee’s salary
- The employee’s salary is made up of a base salary plus a dearness allowance, a retention bonus, and the monetary worth of food concessions that can be redeemed for cash
- In order to avoid penalties, the employer must submit their monthly contribution within 15 days of the end of each month
- In order for the employer to bear the expense of all required contributions, they must do so
- It is the primary employer’s responsibility to pay for all employees, whether employed directly or through a contractor
- To be eligible for pension benefits, you must have worked at least ten years for your employer
- If you have fewer than ten years of service, but have been unemployed for more than two months, you can take a lump-sum payment from your EPS account – https://www.epfindia.gov.in/
- According to the plan, the person’s retirement age is set at 58 years of age
- An employee’s membership in the Pension Fund is terminated at the time he or she begins taking advantage of lower pension benefits (at the age 50)
Calculate Your EPS Pension
The member’s pensionable salary and the number of years of service determine the PF pension amount. The monthly pension amount for an EPFO member is determined using the following formula: Pensionable Pay and Pensionable Service divided by 70 equals the member’s monthly pay.
Pensionable Pay
An Employees’ Pension Scheme participant’s ‘pensionable salary’ is the average monthly wage they received in the 12 months prior to their retirement. No attention will be given to any non-contributory periods in the prior 12 months, and the employee will receive credit for those days. This means that the individual’s total monthly compensation will be divided by 25 days and multiplied by 30 if he begins work on the 5th day of the month.
Month-on-Month Payment
For a person making ₹15,000 a month, the salary would be ₹12,500 if they worked 25 days in a row ( ₹500 per day less for 5 days). For the purposes of EPS, however, the monthly pay of ₹15,000 will be used.The maximum monthly pensionable wage is ₹15,000.
The amount that will be transferred into the employee’s EPS account is calculated as follows: ₹15,000 x 8.33/100 = ₹1250.
Pensionable Service
The pensionable service is based on the member’s actual service period. When determining a person’s pensionable service period, the time spent working for various employers is tallied up. Every time an EPFO member moves jobs, the new employer needs to see the EPS Scheme Certificate that was provided by EPFO.
In addition, EPFO members who have completed 20 years of service receive a two-year bonus. After 10 years of service, an employee is eligible for a pension if he or she withdraws his or her EPS corpus prior using 15 g PF form to completing the required service term of 10 years. Those who wish to reapply for EPS will have to start over from scratch.
If an employee has been with the company for less than six months, their salary will be rounded down to the previous year’s amount. It will be roughly 17 years if an employee has worked for the company for a total of 17 years and 2 months. Employees who have worked for 14 years and 7 months will have their service time rounded up to 15 years.
Minimum And Maximum PF Pensions
The amount of pf pension one receives depends on various factors, including the number of years of service and the last drawn salary. However, there are set minimum and maximum limits. As of my last update in 2021, the minimum pension amount under the Employees’ Pension Scheme (EPS) was set at ₹1,000 per month, ensuring that retirees receive at least this sum. On the other hand, there isn’t a fixed “maximum” PF pension amount per se, but the amount is effectively capped by the calculation method based on one’s last drawn wages and years of service. It’s essential to keep updated with the latest regulations, as these figures might be revised by the government from time to time to account for inflation and other economic factors.
Check the Amount of Your PF
You can see how much money you’ve saved in your Employees’ Pension Scheme account by checking your EPF Passbook. Every month, the employer deposits an EPS contribution into your account. It is found in the final column of your passbook. The EPF Passbook online portal allows members to download the passbook by logging in with their UAN (Universal Account Number) and password.
Vakilsearch’s specialists can provide information on the various types of provident funds and associated taxes. Experts will guide and help you as you move forward.
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