Employee Pension Scheme: There is good news for pension holders. The Employees’ Provident Fund Organization (EPFO) is contemplating to bring a new pension scheme for the employees.
At the same time, the government is also considering to remove the cap under the Employee Pension Scheme (EPS). Let us understand it in detail.What is the EPS limit?
At present, the salary for calculating pension is limited to Rs 15,000 per month. Meaning, whatever your salary is, but the calculation of pension will be done at Rs 15,000. The matter of removing this limit is going on in the High Court.
What are the existing rules of EPS?
Every salaried person becomes a member of EPS. In this, 12 percent of the employee’s salary is deposited in EPF and the same part is given by the company, but a part of it 8.33 percent also goes to EPS. Now according to the limit of Rs 15000, the total pension (8.33% of 15,000) comes to Rs 1250.
When the time of retirement of the employee comes, the maximum salary taken to calculate pension is Rs 15000. According to this, the maximum pension under EPS of the employee will be Rs 7,500 only.
How is pension calculated?
First of all, you should know that if you have started contributing to EPS before September 1, 2014, then the maximum salary limit for pension contribution will be considered as Rs.6500. On the other hand, if you have started contributing to EPS after September 1, 2014, then the maximum salary limit will be 15,000. Let us now understand the calculation.
Formula for EPS Calculation:
Monthly Pension = (Pensionable Salary x Years of EPS Contribution)/70
Let us assume that if the employee started contributing to EPS after 1st September, 2014, then the maximum salary limit for pension would be Rs 15,000. Also let’s say he worked for 30 years.
Monthly Pension = 15,000X30/70
= Rs.6428 maximum and minimum pension
According to the rules, if the employee has worked for 6 months or more, then it will be considered as 1 year and if it is less then it will not be taken.
For example, if an employee has worked for 14 years 7 months, then he will be considered as 15 years, while if he has worked for 14 years and 5 months, then it will be considered as 14 years only.
The minimum pension amount under EPS is Rs 1000 per month, while the maximum pension is Rs 7500. Now if the limit of Rs 15000 is eliminated and it will be Rs 20 thousand, then according to the EPS formula, the amount of pension will be (20,000 X 30) / 70 = Rs 8,571.
Existing Terms and Conditions for Pension (EPS):
- It is necessary to be an EPF member for pension.
- Must have been in the job for at least 10 regular years.
- Pension is available when the employee turns 58.
- There is an option to take pension after 50 years and even before the age of 58.
- Keep in mind that on the first pension, you will get the reduced pension and for this you will have to fill Form 10D.
- On the death of the employee, the family gets pension.
- If the service history is less than 10 years, then they will get the option to withdraw the pension amount at the age of 58 years.
