Employees’ Pension Scheme (EPS-95): Contribution, Eligibility, Pension Types and Facts

Background

• EPS came into force on 16 November 1995, replacing the Employees’ Family Pension Scheme of 1971, under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
• It is administered by the EPFO under the Ministry of Labour and Employment, with the Central Board of Trustees as the apex decision-making body.
• Every member of the Employees’ Provident Fund is automatically a member of EPS, subject to the wage ceiling.

How EPS Is Funded

• The employee contributes 12% of basic wages plus dearness allowance to the Provident Fund; nothing goes directly from the employee to EPS.
• The employer also contributes 12%; of this, 8.33% goes to EPS and 3.67% to the Provident Fund.
• The 8.33% is calculated on a pensionable salary ceiling of Rs 15,000 a month (raised from Rs 6,500 on 1 September 2014), so the standard EPS contribution is Rs 1,250 a month.
• The Central Government contributes 1.16% of the pensionable salary to the pension fund.
• Coverage is mandatory for employees whose basic wage is up to Rs 15,000 a month at the time of joining; those above the ceiling may not be automatically enrolled in EPS.

Eligibility and Pension Formula

• Superannuation pension: at 58 years after at least 10 years of pensionable service.
• Early pension: from age 50, with a reduction of 4% for every year short of 58.
• Formula: monthly pension = (pensionable salary x pensionable service) / 70, where pensionable salary is the average of the last 60 months’ wages, capped at the ceiling.
• Minimum pension: Rs 1,000 a month, introduced in September 2014.
• A member with less than 10 years of service can take a withdrawal benefit or a scheme certificate to keep the service count.

Types of Pension Under EPS

• Superannuation and early pension for the member.
• Disablement pension on permanent and total disablement during service, even with less than 10 years.
• Widow or widower pension for life or until remarriage.
• Children pension for up to two children at a time until the age of 25, along with the widow pension.
• Orphan pension when both parents have died.
• Nominee or dependent-parent pension when there is no family.

Recent Developments

• Higher pension on actual salary: in November 2022 the Supreme Court (EPFO vs Sunil Kumar B.) upheld the 2014 amendment but allowed eligible members to jointly opt, with their employers, for pension on actual wages above the ceiling; EPFO processed these joint options in 2023-24.
• Centralized Pension Payment System (CPPS): from 1 January 2025 EPS pensioners can draw pension from any bank, any branch in India, without transferring the Pension Payment Order.
• The demand to raise the minimum pension above Rs 1,000 and the wage ceiling above Rs 15,000 has been examined by parliamentary committees and the Central Board of Trustees.

FAQs

Does the employee contribute to EPS?

No. The employee’s full 12% goes to the Provident Fund; EPS is funded from the employer’s 8.33% and the government’s 1.16%.

What happens if service is less than 10 years?

The member is not eligible for a monthly pension and can withdraw the EPS accumulation as a withdrawal benefit or obtain a scheme certificate to add future service.

Is EPS the same as the Atal Pension Yojana?

No. APY is a voluntary, defined-benefit scheme for unorganised workers run through PFRDA; EPS-95 is the statutory pension scheme for organised-sector employees under EPFO.