What is EPS-95?
section 6A(1) of THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 provides that-
The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees’ Pension Scheme for the purpose of providing for—
(a) superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to which this Act applies; and
(b) widow or widower’s pension, children pension or orphan pension payable to the beneficiaries of such employees.
In exercise of the powers conferred by Section 6A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the Central Government came up with a scheme called “The Employees’ Pension Scheme, 1995” or “EPS-95”. This Scheme came into force on 16th day of November, 1995.
This EPS-95 is a pension scheme which is different from National Pension Scheme (NPS). NPS is another Scheme for which separate deduction under section 80CCD(1B) & 80CCD(2) of Income Tax is available. NO Such deductions are available in case of EPS. There is option for return of corpus in NPS but there is not option for return of corpus in case of EPS. These two schemes are not related to each other. An employee may have both of these scheme or any of these schemes or none of these schemes, it depends on the choice opted by the employee. There is no restriction on being beneficiary in both the schemes.
What are the basic features of EPS-95 Scheme?
Some important features of EPS-95 as amended till date can be enlisted as below: –
1. Date of applicability
Employee Pension Scheme which came into force on 16th November 1995 hence known as The Employees’ Pension Scheme, 1995 or EPS-95.
2. Administration of EPS-95
EPS-95 is administered by The Employees’ Provident Fund Organisation.
3. Corpus of EPS-95
EPS-95 is not an investment-based scheme, contribution to scheme is not your corpus but if you are a member to the scheme then contribution by your employer to this scheme is an expense and you are not getting it back any way. You will be getting life-time pension to you and your spouse (children pension only upto the age of 25 years).
4. Basis of pension under EPS-95
Pension under EPS-95 is not calculated by value of your contribution but your pension value is based on your pensionable salary (avg Salary for 60 months at the time of retirement) and Pensionable Service (no. of years of membership of EPS)
5. Taxability of Pension under EPS-95
Pension under EPS-95 is taxable under the head ‘Income from Salary”.
6. Types of pensions under EPS-95
EPS-95 Scheme offers different types of pension such as Superannuation pension (58 years), Deferment Pension(60 years), Early Pension (Unemployed & 50years), Disablement Pension, Widow Pension, Children Pension, Orphan Pension.
7. Eligibility for pension under EPS-95 (minimum service period)
To be eligible for pension, you must have completed at least 10 years of service.If a member has not rendered the eligible service of 10 years on the date of exit, or on attaining the 58 years of age, whichever is earlier, such member shall be entitled to a withdrawal benefit but not pension. (Except in case of death of employee or permanent disability during the service, in such case employee/widow/children are entitled to pension).
8. Date of retirement/superannuation under EPS-95
Regular pension under EPS-95 starts at age of superannuation i.e.58 years. Hence An employee shall cease to be the member of Pension Fund from the date of attaining 58 years of age or from the date of vesting admissible benefits under the Scheme, whichever is earlier.
9. Deferment of Pension under EPS-95
As per clause 12(7B) of this scheme, a member who has attained the age of 58 years is allowed to defer the age of drawing pension upto 60 years of age. In case of deferment, the amount of pension shall be increased at the rate of 4% for every completed year after the age of 58 years.
10. Early pension under EPS-95 if employment is lost
If an employee has rendered eligible service of 10 years or more and retires or otherwise ceases to be in the employment before attaining the age of 58 years, if he so desires, may be allowed to draw an early pension from a date earlier than 58 years of age but not earlier than 50 years of age. In such cases, the amount of pension shall be reduced at the rate of 4%, for every year the age falls short of 58 years.
11. Maximum Pension under EPS-95
Maximum Pension under the scheme is 50% of pensionable salary.
12. Pensionable Salary under EPS-95 upto 31.8.2014
Upto 31.8.2014, The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 12 months preceding the date of exit from the scheme. (This is subject to maximum limit of pensionable salary, if option for contribution at actual salary is not taken)
13. Pensionable Salary under EPS-95 w.e.f. 01.09.2014
W.e.f. 1.09.2014, The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme. (This is subject to maximum limit of pensionable salary, if option for contribution at actual salary is not taken)
14. Maximum limit of pensionable Salary under EPS-95
At the start of the scheme EPS-95 (16.11.1995), maximum pensionable salary was Rs. 5000. W.e.f. 01.06.2001 , the maximum pensionable salary was increased to Rs. 6500. W.e.f. 1.09.2014, The maximum pensionable salary was again increased to Rs.15000/- per month.(if option for contribution at actual salary is not taken)
15. Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(3) of EPS-95)
W.e.f. 16.03 1996, option was given under clause 11(3),to contribute to the scheme considering a percentage on the actual salary, provided the employee and the employer have no objection. This option was added without any deadline to exercise. It stated that “Provided that if at the option of the employer and employee,contribution paid on salary exceeding Rs.6500/- per month from the date of commencement of this Scheme or from the date salary exceedsRs.6500/-whichever is later, and 8.33% share of the employers’ thereof is remitted into the Pension Fund, pensionable salary shall be based on such higher salary”.
W.e.f. 01.September 2014, option for higher pension (without any deadline) was deleted and nullified the choice of an employee to exercise the right to contribute to EPS on higher/ uncapped salary, and subsequently to earn higher pension.
16. Fresh Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(4) of EPS-95)
W.e.f 01.09.2014, the fresh option was inserted in clause 11(4) with a condition of additional contribution of 1.16% in addition to 8.33%. This option to opt for higher pensionable salary which was to be exercised jointly by the employer and employee continue to contribute on salary exceeding fifteen thousand rupees per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary. Fresh option for higher salary was to be exercised by the member within a period of 6 months from the 01.09.2014.
17. Consequence of Not-opting for option of Higher pension under para 11(4) of EPS-95
Option to opt for higher pensionable salary which was to be exercised jointly by the employer and employee continue to contribute on salary exceeding Rs. 15000/- per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary and if no option is exercised by the member within such period (including the extended period), it shall be deemed that the member has not opted for contribution over wage ceiling and the contributions to the Pension Fund made over the wage ceiling in respect of the member shall be diverted to the Provident Fund account of the member along with interest as declared under the Employees’ Provident Funds Scheme from time to time.
18. New Deadline to for Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(4) of EPS-95)
Hon’ble Supreme Court vide judgement dated 04.11.2022, allowed eligible employees to submit fresh option within 4 months from the date of this judgement i.e upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for OFHP (option for higher pension) upto 26.06.2023. Application for higher pension can be filled in by eligible employees through online portal of EPFO (https://unifiedportal-mem.epfindia.gov.in/) .
19. New Pension calculation method provided by circular 1357 dated 01.06.2023
As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023, EPFO clarified that –
- Cases found eligible for pension on higher wages where date of commencement of pension is prior to 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 12 months preceding the date of exit from the membership of pension Fund.
- Cases found eligible for pension on higher wages where date of commencement of pension is post 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 60 months preceding the date of exit from the membership of pension Fund.
What are important changes in EPS-95 scheme since inception? What are changes in EPS-95 w.e.f. 1.9.2014.?
Some of important changes to EPS-95 scheme since inception are as follows:-
- 16-11-1995:
- EPS-95 Scheme came into force.
- 16.03.1996 :
- W.e.f. 16.03 1996, option was given under clause 11(3),to contribute to the scheme considering a percentage on the actual salary, provided the employee and the employer have no objection. This option was added without any deadline to exercise. It stated that “Provided that if at the option of the employer and employee, contribution paid on salary exceeding Rs.6500/- per month from the date of commencement of this Scheme or from the date salary exceeds Rs.6500/-whichever is later, and 8.33% share of the employers’ thereof is remitted into the Pension Fund, pensionable salary shall be based on such higher salary”.
- 01.06.2001:
- W.e.f. 01.06.2001 , the maximum pensionable salary was increased to Rs. 6500/-
- 01.09.2014:
- The maximum pensionable salary was again increased to Rs.15000/- per month.
- The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme.
- W.e.f. 01.September 2014, option for higher pension (without any deadline which was added w.e.f 16.3.1996) was deleted and nullified the choice of an employee to exercise the right to contribute to EPS on higher/ uncapped salary, and subsequently to earn higher pension.
- 01.09.2014:- Fresh option under clause 11(4) of EPS-95 Scheme was added for opting higher salary as pensionable salary . This option was to be exercised by the member within a period of 6 months from the 01.09.2014.
- Requirement of additional contribution @ 1.16% (of salary above Rs. 15000/-), was added with the fresh option under para 11(4). This additional contribution was to be paid from employee’s Contribution. Vide G.O.I Gazette Notification No. S.O. 2061(E) dated 3rd May 2023, the requirement of additional contribution shifted to Employer’s Contribution from Employee’s Contribution.
- 01.03.2015:
- Deadline for fresh option (added w.e.f. 01.09.2014) for higher salary passed.
- 04.11.2022:
- Hon’ble Supreme Court vide judgement dated 04.11.2022, allowed eligible employees to submit fresh option within 4 months from the date of this judgement i.e upto 03.03.2023.
- The deadline for submission of fresh option for opting actual salary as pensionable salary for higher pension was extended to 03.05.2023 by EPFO.
- 03.05.2023:-
- Vide G.O.I Gazette Notification No. S.O. 2061(E) dated 3rd May 2023, the requirement of additional contribution shifted to Employer’s Contribution from Employee’s Contribution.
- Now EPFO has further extended the deadline to apply for OFHP (option for higher pension) upto 26.06.2023
- 11.05.2023:-
- Method of payment of balance contribution & additional contribution (on salary above maximum cap for opting pension on higher salary) is provided vide circular dated 11.5.2023.
- Calculation of balance contribution and additional contribution is still awaited.
- 01.06.2023
- As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023, EPFO clarified that –
- Cases found eligible for pension on higher wages where date of commencement of pension is prior to 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 12 months preceding the date of exit from the membership of pension Fund.
- Cases found eligible for pension on higher wages where date of commencement of pension is post 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 60 months preceding the date of exit from the membership of pension Fund.
- As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023, EPFO clarified that –
What are different types of pensions under EPS-95 Scheme?
The different types of pensions under Employees’ Pension Scheme are as follows:
1. Superannuation pension
IF a member has rendered eligible service of 10 years or more and retires on attaining the age of 58 years. He is eligible for superannuation pension for the life time.
2. Delayed pension/Retirement pension/Deferred Pension
As per clause 12(7B) of this scheme, a member who has attained the age of 58 years is allowed to defer the age of drawing pension upto 60 years of age. In case of deferment, the amount of pension shall be increased at the rate of 4% for every completed year after the age of 58 years. The member, at his or her option, may also be allowed to continue contributions to the Employees’ Pension Fund for the period for which the drawl of pension has been deferred, if the member is continuing in employment after the age of fifty-eight years, and the pensionable service and pensionable salary for the purpose of determination of pension will be reckoned taking into account the period for which contributions were made after the age of fifty-eight years but not beyond the age of sixty years.
3. Permanent disability pension
EPS -95 scheme, Provides monthly pension to the members who becomes disabled totally and permanently even after not serving the pensionable service period. A member, who is permanently and totally disabled during the employment shall be entitled to pension notwithstanding the fact that he/she has not rendered the pensionable service provided that she/he has made at least one month’s contribution to the Pension Fund. The monthly member’s pension in such cases shall be payable from the date following the date of permanent total disablement and shall be tenable for the life-time of the member. A member applying for benefits under this paragraph shall be required to undergo such medical examination as may be prescribed by the Central Board to determine whether or not he or she is permanently and totally unfit for the employment which he or she was doing at the time of such disablement.
4. Widow Pension:
The spouse of deceased member is eligible for widow pension and will receive the amount until her remarriage or death. The pension amount will be payable to the eldest widow, in case a family has more than one widow. In case the widow/widower is receiving the EPS amount, they will continue to receive the amount until his/her death. After that, the children will receive the pension amount until they attain the age of 25 years. In case the child is physically challenged, they will receive the pension amount until his/her death. IF a member dies before commencement of pension (i.e. dies while in service or after exit but before attaining the age of 58 before commencement of pension) then widow pension will be equal to the monthly member’s pension which would have been admissible. But if a member dies after commencement of pension then widow pension will be 50% of the member’s monthly pension payable to member on the date of death.
5. Child Pension:
In addition to monthly widow pension, monthly child pension will also be paid to the surviving children of the family, in case the pensionable member dies. The amount payable is 25% of the widow pension and will be paid until the age of 25 years of the child. The amount is payable for up to a maximum of two children. In case the widow/widower is receiving monthly pension, they will continue to receive the amount until his/her death, But children will receive the pension amount until they attain the age of 25 years. In case the child is physically challenged, they will receive the pension amount until his/her death
6. Orphan Pension:
The orphan pension of 75% of monthly widow pension is payable to the two surviving children in case the pensionable member dies and if does not have a surviving widow. If the widower/widow remarries, the children will be classified as orphans and would receive the additional pension amount.
7. Early Pension/Reduced Pension:
Pensionable members who have completed eligible service of 10 years or more and retires or otherwise cease to be in employment before attaining the age of 58 years. Such member if he so desires, may be allowed to draw an early pension from a date earlier than 58 years of age but not earlier than 50 years of age. In such cases, the amount of pension shall be reduced at the rate of 4% , for every year the age falls short of 58 years.
What is option for higher pension under EPS-95 scheme?
As per provisions of THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 , both the employee and the employer contribute 12% of employee’s basic salary, dearness allowance(DA), and retaining allowance to EPF. After Inception of the EPS-Scheme, some part (i.e. 8.33% of pensionable salary) of employer’s contribution need to go to EPS fund. For calculation of EPS contribution, pensionable salary was required to be fixed which is fixed as follows:-
- The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme. But there is a maximum limit of this pensionable salary which is as follows:-
- Rs. 5000 (from 16.11.1995 to 31.05.2001)
- Rs. 6500 (from 01.06.2001 to 31.08.2014)
- Rs. 15000 (w.e.f 1.9.2014)
- As there is maximum cap of pensionable salary that’s why contribution to EPS is calculated on this salary and pension to member is also calculated on this salary. Hence maximum pension under EPS-95 was limited to 7500/- (i.e. 50 of pensionable salary).
NOW THE OPTION FOR HIGHER SALARY COME TO PICTURE>>>>
- The option for higher salary was first introduced on 16.03.1996, under clause 11(3) of EPS scheme. This option provided that if employer and employee agree to contribute to EPS scheme on salary exceeding the limit of (Rs. 5000/Rs. 6500/ Rs. 15000), then pensionable salary shall be based on such higher salary. Hence option is above removing the maximum limit of pensionable salary for contribution to EPS scheme and for calculation of pension. Under this option , contribution is also done on actual salary and pension is also drawn on actual salary.
- This initial option which was introduced w.e.f. 16.03.1996 was deleted on 01.09.2014 and fresh option was provided under clause 11(4) of EPS scheme which was to be exercised jointly by employer & employee within the period of 6 months from 01.09.2014. Hon’ble Supreme Court vide judgement dated 04.11.2022, allowed eligible employees to submit fresh option within 4 months from the date of judgement i.e. upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for OFHP (option for higher pension) upto26.06.2023
Who contribute to EPS-95 scheme and how contribution is calculated?
As per provisions of THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 , both the employee and the employer contribute 12% of employee’s basic salary, dearness allowance(DA), and retaining allowance to EPF. Which is adjusted as follows:-
- Employee’s entire 12% contribution goes to EPF.
- Out of Employer’s Contribution 8.33% of Basic, DA and Retaining allowance (i.e. pensionable Salary i.e. maximum cap of 15000/- w.e.f. 1.9.2014, earlier it was capped at Rs. 6500) goes to EPS-95.
- Balance of Employer contribution goes to EPF.
- In addition to Employer’s Contribution, govt also contribute 1.16% of the salary fixed for EPS-95 to EPS-95.
Now with option to contribute at actual salary the flow of contribution to EPS is as follows:-
1. Contribution to EPS if member does not opt for higher pension based on actual salary
For Example, if a member’s salary basic +DA+RA is Rs. 100000/- per month. Then if he does not opt to higher pension (option for choosing actual salary as pensionable salary) then EPF contribution flows as given below:-
| Particulars | Basic +DA+RA | Contribution value | added to EPF | Added to EPS-95 (pension Scheme) |
| Employee’s Contribution (12%) | 100000 | Rs. 12000/- | Rs. 12000/- | 0 |
| Employer’s Contribution (12%) | 100000 | Rs. 12000/- | Rs. 10750/- (balance) | Rs.1250/- (8.33% of Rs. 15000) |
| Govt. Contribution (1.16%) | 15000 (max) | Rs. 174/- | 0 | Rs. 174/- |
2. Contribution to EPS if member opted for higher pension based on actual salary
For Example. if a member’s salary basic +DA+RA is Rs. 100000/- per month. Then if he does opt to higher pension (option for choosing actual salary as pensionable salary) then EPF contribution flows as given below:-
| Particulars | Basic +DA+RA | Contribution value | added to EPF | Added to EPS-95 (pension Scheme) |
| Employee’s Contribution (12%) | 100000 | Rs. 12000/- | Rs. 12000/- | 0 |
| Employer’s Contribution (12%) | 100000 | Rs. 12000/- | Rs. 2684/- (balance) | Rs.9316/- i.e. (Rs. 8330+ Rs. 986) ((i) 8.33% of Rs. 100000/- AND (ii) 1.16% of Rs. 85000 i.e. (100000-15000) |
| Govt. Contribution (1.16%) | 15000 (max) | Rs. 174/- | 0 | Rs. 174/- |
How to determine pensionable Salary under EPS-95?
As per clause 11 of EPS-95 Scheme:-
1. Period for Pensionable Salary under EPS-95
The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme.
2. Maximum limit of Pensionable salary under EPS-95
- The pensionable salary calculated as above is subject to the maximum limit. The maximum pensionable salary shall be limited to :-
- Rs. 5000 (from 16.11.1995 to 31.05.2001)
- Rs. 6500 (from 01.06.2001 to 31.08.2014)
- Rs. 15000 (w.e.f 1.9.2014)
3. Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(3) & 11(4) of EPS-95)
But w.e.f 16.03.1996, A option (under clause 11(3)) was provided to employees to opt for higher pensionable salary without any deadline to opt it but this option was deleted on 1.9.2014 and a fresh option (under clause 11(4)) was to be exercised jointly by the employer and employee continue to contribute on salary exceeding above limit and the pensionable salary for members who opt this option shall be based on the higher salary. This fresh option was to be exercised by the member within a period of 6 months from the 01.09.2014.
4. Time limit to excercise option to remove maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(3) & 11(4) of EPS-95)
Hon’ble Supreme Court vide judgement dated 04.11.2022, allowed eligible employees to submit fresh option upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for OFHP (option for higher pension) upto26.06.2023
5. Calculation of pensionable salary also clarified by circular 1357 dated 01.06.2023
As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023, EPFO clarified that –
- Cases found eligible for pension on higher wages where date of commencement of pension is prior to 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 12 months preceding the date of exit from the membership of pension Fund.
- Cases found eligible for pension on higher wages where date of commencement of pension is post 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 60 months preceding the date of exit from the membership of pension Fund.
6. Other Points to be considered for calculation of pensionable salary under EPS-95
- Pensionable salary shall be determined on pro-rata ·basis for the pensionable service up to the 1st day of September, 2014, subject to a maximum of Rs. 6500 per month, and for the period thereafter at the maximum of Rs. 15000 per month.If member has opted for Higher pension on the basis of actual pensionable salary then actual salary may be considered irrespective of ceiling of pensionable salary.The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme.
- Provided that if a member was not in receipt of full pay during the period of sixty months preceding the day he ceased to be the member of the Pension Fund, the average of previous sixty months full pay drawn by him during the period for which contribution to the pension fund was recovered, shall be taken into account as pensionable salary for calculating pension.
- If during the said span of 60 months there are non-contributory periods of service including cases where the member has drawn salary for a part of the month, the total wages during the 60 months span shall be divided by the actual number of days for which salary has been drawn and the amount so derived shall be multiplied by 30 to work out the average monthly pay.
- The existing members as on the 1st day of September, 2014, who at the option of the employer and employee, had been contributing on salary exceeding Rs. 6500/- per month, may on a fresh option to be exercised jointly by the employer and employee continue to contribute on salary exceeding Rs. 15000/- per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary. Provided that the aforesaid members have to contribute at the rate of 1.16 % on salary exceeding Rs. 15000/- as an additional contribution from and out of the contributions payable by the employees(amended by gazette Notification No. S.O. 2061(E) dated 3rd May 2023, this additional contribution is now not payable out of employee’s contribution but it is now payable out of employer’s contribution)
How to determine pensionable service under EPS-95?
As per clause 10 of EPS-95 Scheme:-
- The pensionable service of the member shall be determined with reference to the contributions received or are receivable on his behalf in the Employees’ Pension Fund. Hence Pensionable service is the number of years for which a member contributed through his employer to EPS fund.
- In the case of the member who superannuates on attaining the age of 58 years, and who has rendered 20 years pensionable service or more, his pensionable service shall be increased by adding a weightage of 2 years.
- Maximum pensionable service allowed under the EPS-95 scheme is 35 years.
- The fraction of service for six months or more is treated as one year and the service less than six months shall be ignored. So 9 (nine) years and 6 (six) months will berounded up to 10 (ten) years.
- If an employee has worked for six months or more, his or her service tenure is counted as one year. The working length will not be taken into account if the service period is less than 6 months. As a result, if an employee has worked for ten years and seven months, the number of years of service will be calculated as eleven. However, if a person has worked for ten years and five months, the number of years of service is ten.
- If no wage is earned for a certain period, that period is to be deducted from the service, as there will be no contribution to Pension Fund
How to determine monthly pension under EPS-95?
As per clause 12 of EPS-95 Scheme:-
1. Pension calculation formula for EPS-95
- Member’s Monthly Pension = Pensionable salary X Pensionable service/ 70.
2. Past service benefit to be added if joined before 15.11.1995
IN case Who joined before 15.11.1995 and retiring after 15.11.1995):-Past service benefit in added to the pension value arrived as per above provision. The past service benefit is arrived by finding value of Table A (Enhanced Pension for past service). The value of table A is multiplied by value of table B (Selection of Factor for Multiplication (Counting the service period rendered after 16.11.1995) to arrive at past service benefit.
3. Calculation on pro-rata basis for services up to 01.09.2014 and service after 01.09.2014 .
Provided that the members’ monthly pension shall be determined on a pro-rata basis for the pensionable service upto 01.09.2014 at the maximum pensionable salary of Rs. 6500/- per month and for the period thereafter at the maximum pensionable salary of Rs. 15000/- per month. If member has opted for Higher pension on the basis of actual pensionable salary then pension may be calculated as per actual salary.
4. Addition to pension if deferred
As per clause 12(7B) of this scheme, a member who has attained the age of 58 years is allowed to defer the age of drawing pension upto 60 years of age. In case of deferment, the amount of pension shall be increased at the rate of 4% for every completed year after the age of 58 years.
5. Reduction in pension if drawn early
If an employee has rendered eligible service of 10 years or more and retires or otherwise ceases to be in the employment before attaining the age of 58 years, if he so desires, may be allowed to draw an early pension from a date earlier than 58 years of age but not earlier than 50 years of age. In such cases, the amount of pension shall be reduced at the rate of 4%, for every year the age falls short of 58 years.
6. maximum limit of pension
Maximum Pension under the scheme is 50% of pensionable salary because maximum pensionable service allowed under the EPS-95 scheme is 35 years.
7. Pension calculation method as confirmed by circular 1357 dated 01.06.2023
As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023, EPFO clarified that –
- Cases found eligible for pension on higher wages where date of commencement of pension is prior to 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 12 months preceding the date of exit from the membership of pension Fund.
- Cases found eligible for pension on higher wages where date of commencement of pension is post 01.09.2014:- Pension shall be calculated based on average monthly pay drawn during contributory period of service in the span of 60 months preceding the date of exit from the membership of pension Fund.
What are highlights of Hon’ble Supreme Court judgement dated 04.11.2022 regarding EPS-95?
- The employees who had exercised option under the proviso to paragraph11(3) of the 1995 scheme and continued to be in service as on 1st September2014, will be guided by the amended provisions of paragraph 11(4) of the Pension scheme since Para11(3) was deleted w.e.f. 1.9.2014 vide Notification dated 22.8.2014.
- The members of the scheme, who did not exercise option, as contemplated in the proviso to paragraph 11(3) of the Pension Scheme (as it was before the2014 Amendment) would be entitled to exercise option under paragraph11(4) of the post amendment scheme.
- The scheme as it stood before 1st September2014 did not provide for any cut off date and thus those members shall been titled to exercise option in terms of paragraph11(4) of the scheme, as it stands at present. All employees who did not exercise option for higher pension on 1.9.2014 due to confusion of cut off date can now exercise their option of higher pension within 4 (four) months from the date of the this judgement i.e.upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for higher pension upto 26.06.2023.
- The employees who had retired prior to 1st September 2014 without exercising any option under paragraph 11(3) of the pre-amendment scheme have already exited from the membership thereof. They would not been titled to the benefit of this judgement.
- The requirement of the members to contribute at the rate of 1.16 per cent of their salary to the extent such salary exceeds Rs.15,000/- per month as an additional contribution under the amended scheme is held to be ultra vires the provisions of the 1952 Act. (But this is now regularised by G.O.I Gazette Notification No. S.O. 2061(E) dated 3rd May 2023, increasing employer’s contribution to nine and forty-ninth per cent. (9.49%) of the basic wages,dearness allowance and retaining allowance of each member by increasing one and sixteenth percent. (1.16%) from the extant eight and one-third per cent. (8.33%). The increased contribution shall be applicable to basic wages, dearness allowance and retaining allowance to the extent such basic wages, dearness allowance and retaining allowance exceed fifteen thousand rupees per month) Hence Employee need not to contribute additional 1.16% of their Salary over and above Rs. 15,000/- for opting towards higher pension. This is to be deducted from employer’s contribution.
- Joint option to be submitted by the employee and by the employer and option of separated/left employees to be also signed by the ex-employer.
How to apply for option for higher pension under EPS-95? How to check status of my application for higher pension under EPS-95? What is last date to apply for higher pension under EPS-95?
The following steps may be followed to apply for option under clause 11(4) for pension on higher salary:-
- Contact your employer to obtain your UAN. Your UAN is readily available with employer.
- Login to unified portal at https://unifiedportal-mem.epfindia.gov.in/
- Check your detail at UAN portal like UAN of the employee, employee adhaar number, employee name and Date of Birth, organisation name, date of joining EPS etc.Further, employee should have a valid adhaar linked mobile number for validating the application.
- Online application for can be submitted only in those cases where adhaar is linked to UAN. In case of error message like “NO detail found” Employee need to take up with their employer to get the detail updated at EPFO portal.
- Application for validation of joint option for those members who had retired on or before 01.09.2014 and exercised joint option under para 11(3) of EPS scheme prior to 01.09.2014 can also be submitted with detail of PPO at the link given at Unified portal EPFO: Pension On Higher Wages (epfindia.gov.in).
- Application for Exercise of joint option for employees who were in service prior to 01.09.2014 and continue to be in service on or after 01.09.2014 but could not exercise joint option as given under para 11(3) of EPS-95 Scheme, can be submitted at link given at unified portal EPFO: Pension On Higher Wages (epfindia.gov.in)
- EPS account number became centralised w.e.f. 01.03.2009, Employee need to contract their employee for obtaining data for service prior to 01.03.2009 for detail like getting details as EPS no., date of entry, date of exit etc.
- Following documents needs to attached with the application:-
- Certificate from employer (Annexure-A)
- Undertaking by Employee (Annexure-B)
- PF statement
- Payslip of relevant period (Aug-2014 & Sept-2014)
- After submission of application, it is reflected to your employee’s login to let the employer accept the same. If it is accepted by employer then it reaches to EPFO, and it your application is accepted by EPFO then EPFO will calculated the arrear of contribution which will be required to deposited within the manner as provided by EPFO in circular dated 11.5.2023.
- To check status of your application , you need to again go to link to apply for higher pension on actual salary.
For employee retired before 1.9.14:- EPFO: Pension On Higher Wages (epfindia.gov.in).
For serving emp on 1.9.14: EPFO: Pension On Higher Wages (epfindia.gov.in)
All employees who did not exercise option for higher pension on 1.9.2014 due to confusion of cut off date can now exercise their option of higher pension within 4 (four) months from the date of the this judgement i.e.upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for higher pension upto 26.06.2023
Should we opt for higher pension under EPS-95 or not?
This decision is not applicbale to those are have never been member of EPS-95 Scheme. Let’s analyse the case for different category of employees, who are/were members of EPS-95 Scheme as under-
Those who had retired (aged 58 years) on or before 1.9.2014 and never excercised option for higher pension as under para 11(3) of EPS scheme at that time.
This catergory of Employees are not eligible to opt for higher pension at this time.
Those who had retired (aged 58 years) on or before 1.9.2014 and exercised option for higher pension as under para 11(3) of EPS scheme at that time.
This category of employee either already be getting higher pension on actual salary or if there application was rejected at that time, they can now apply afresh with the proof of rejection. In most fo the cases their arrears is nearly neutralise their additional contribution, and pension will rise for rest of their life and life of spouse. Hence they may decide to opt for higher pension.
Those who were in service prior to 1.9.2014 and continue to be in service on or after 1.9.2014
IN case of this category, the decision to opt for higher pension depends on many factors, some of points stated here may be helpful in deciding whether you should opt for higher pension or not:-
- IF you opt for higher pension, more part of employer’s contribution will go to EPS hence approx 75% to 80% of employer contribution is utilised for EPS and only little part (20% to 25%) will remain in EPF which will be received by employee at the time of retirement.
- Those who think it will be burdensome to get pension from EPFO please note that whether you opt for higher pension or not, You are still member of EPS and you will be getting pension (may be less pension not higher), but you still have to complete procedure of EPFO for this little pension and also need to submit life certificate annually.
- Looking at the Return on Investment (ROI), which is nearly 15% for EPS-95, it looks fair enough that one should go for higher pension since Higher Pension Scheme is beneficial for the member employees o have long life (WHICH IS ALWAYS UNCERTAIN);
- As there is no option for return of corpus in EPS-95, Simple payback period for the EPS-95 is nearly 7-8 years. Hence if you live for at least 8 year after superannuation i.e. 58+8 = 66 years. Then only you manage to receive your contribution fund back. And still you will continue to get pension till your life and your spouse’s life.
- The main factor in this decision is expected life of member & spouse of member. As more as you live , the more benefit in opting for higher pension in EPS-95.
- But it depends upon many other factors too such as after the death of subscriber/member the spouse gets only 50% Pension and after his/her death the money is lost since children by time would cross 25 years of their age and after 25 years hey are not eligible for Children Pension
- EPS-95 scheme is subject to various changes over the period of time. Change in procedure for calculation of monthly pension is awaited. As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Change may adversely affect pension calculation.
- For those who are still in service , Calculation is based on assumed figure of salary over the service period. The calculation and decision to be taken depends on person to person based on his actual data.
- The decision for higher pension also depends on other investment by the member. If member have other investment which may give enough fund at the time of retirement then he may decide to opt to higher pension as it will reduce EPF balance. But if there is not such investment and if high fund is needed the time of retirement then for various purposes like house, marriage of children etc. then member may decide to keep fund in EPF.
- It is generally seen that after retirement, employee seeks for annuity plans to invest fund to get monthly return to meet their monthly expenses. EPS of also one of those options –
- Annuities offered in banks/insurance companies or
- NPS
- Pradhan Mantri Vaya Vandana Yojana (PMVVY)
- Senior Citizen Savings Scheme
- EPS -95
Important link
- Link for applying for option to opt actual salary as pensionable salary for higher pension.
- Link to check status of application for EPS-95 higher pension
- Link to login to EPS-95 account (UAN login)
- Link to EPFO website
- Link to EPFO circulars
- Link to UAN website (EPS & EPF)
Some important documents related to EPS schemes are:-
- THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952.
- Employees provident Fund Scheme, 1952.
- Employees’ Pension Scheme-1995 (EPS-95)
- The Employees’ Pension Scheme-1995 (EPS-95)TABLE A for past service benefit for those who joined before 16.11.95.
- TABLE B for past service benefit for those who joined before 16.11.95.
- EPFO circular dated 29.12.2022
- EPFO circular dated 20.02.2023.
- EPFO circular dated 04.05.2023. (increasing employer’s contribution to EPS to 9.49% for salary above Rs. 15000/- w.e.f 1.9.2014)
- EPFO circular dated 09.05.2023.
- EPFO circular dated 11.05.2023.
- EPFO circular dated 01.06.2023
- FAQs issued by EPFO for submitting application for higher pension.
- Download calculator for find out arrear of contribution to EPS-95 which is required to be paid to opt to higher pension option.