Employee Pension Scheme: Pension is fixed on the retirement of the employee. But, having a limit in this, the pension after retirement is not very high. Hence there is a demand to remove this limit.
Employee Pension Scheme: There is a constant demand to remove the capping on Employee Pension Scheme (EPS). Now the Supreme Court is also hearing in this matter. In the current structure, there is a ceiling or capping of Rs 15000 per month for pension under the EPS scheme.
What are the rules now?
When an employee becomes a member of Employee Provident Fund (EPF), he also becomes a member of EPS. Contribution of 12% of the basic salary of the employee goes to PF. Apart from the employee, the same part also goes to the employer’s account. But, a part of the contribution of the employer is deposited in the EPS ie Employee Pension Scheme. The contribution of basic salary in EPS is 8.33%. However, the maximum limit of pensionable salary is Rs 15,000. In such a situation, only a maximum of Rs 1250 can be deposited in the pension fund every month.
Understand by example
According to the existing rules, if the basic salary of an employee is Rs 15,000 or more, then Rs 1250 will be deposited in the pension fund. If the basic salary is 10 thousand rupees, then the contribution will be only 833 rupees. The calculation of pension on the retirement of the employee is also considered as the maximum salary of 15 thousand rupees only. In such a situation, after retirement, employees can get only Rs 7,500 as pension under the EPS rule.
What if the 15,000 limit is removed?
According to EPFO’s Retired Enforcement Office Bhanu Pratap Sharma, if the limit of 15 thousand rupees is abolished from the pension, then more than Rs 7,500 can be got pension. But, for this, the contribution of the employer to the EPS will also have to be increased.
How is pension calculated?
- Formula for EPS Calculation = Monthly Pension = (Pensionable Salary x Number of Years Contribution in EPS Account)/70.
- If someone’s monthly salary (average of last 5 years’ salary) is Rs 15,000 and the duration of the job is 30 years, then he will get a pension of only Rs 6,828 per month.
How much pension will you get if the limit is removed?
If the limit of 15 thousand is removed and your basic salary is 20 thousand, then the pension you will get according to the formula will be this. (20,000 X 30)/70 = Rs 8,571
Existing Conditions for Pension (EPS)
- Must be an EPF member.
- Must be in job for at least 10 regular years.
- Pension is available on attaining the age of 58 years. Option to take pension after 50 years and even before the age of 58.
- On taking the first pension, you will get the reduced pension. For this, Form 10D has to be filled.
- 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.