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Published on:

April 14, 2025

Alankar Mishra

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What is the Employee Pension Scheme (EPS) - Eligibility and Benefits

The EPS, or Employee Pension Scheme, is a type of pension that is administered by the Employees’ Provident Fund Organisation (EPFO) specifically for employees in India. EPS was implemented in 1995 and guarantees a continuous pension after an employee retires, ensuring financial self-sufficiency during their later years.

Given the increasing awareness surrounding planning for retirement, every employee should understand how the EPS works. In this article, we will explain the meaning of EPS, its eligibility, contribution rules and other associated benefits in a clear and concise manner.

Overview Table – Employee Pension Scheme (EPS)

Feature	Description
Full Form	Employee Pension Scheme
Launched By	EPFO (Employees' Provident Fund Organisation)
Launch Year	1995
Eligibility	Salaried employees under EPF scheme
Monthly Pension Starts At	Age 58
Minimum Service Required	10 years
Contribution by Employer	8.33% of salary (part of EPF employer share)
Max Pensionable Salary Limit	₹15,000 (as per latest guidelines)
Governing Body	Ministry of Labour and Employment, Government of India

What is the Employee Pension Scheme (EPS)?

The EPS is a social security program which is managed by an organ of the Government of India, EPFO, which comes under the powers of the Ministry of Labor and Employment. Its main objective is to provide a monthly pension to employees after retirement or in cases of disability. Additionally, a monthly pension is payable to the nominee (spouse, child, or dependent relative) in the case of death.

EPS doesn’t work as an independent scheme. It is integrated with the Employee Provident Fund (EPF) system. The EPS program is funded through the pension scheme where a portion of the employer’s contribution to the Employee Provident Fund (EPF) also goes towards EPS – 8.33% of the employee’s salary. This amount gets collected over time, and subsequently utilized for easing pensions.

How Does EPS Work?

Under the EPF framework, both the employer and employee contribute 12% of the employee's basic salary + dearness allowance. From the employer’s share:

8.33% of salary (subject to ₹15,000 ceiling) goes to EPS

The remaining 3.67% goes to the EPF account

Let’s assume a salary of ₹15,000:

Employer’s contribution = ₹1,800 (12%)

EPS share = ₹1,250 (8.33% of ₹15,000)

EPF share = ₹550 (3.67% of ₹15,000)

Thus, every month, ₹1,250 is directed towards building your pension fund.

Who is Eligible for EPS?

You can apply for EPS benefits if:

1. If you are a salaried employee covered under the EPF scheme.

2. You have completed at least 10 years of service.

3. You have reached the age of 58 years (or 50 for early pension).

4. Your salary at the time was ₹15,000 or less.

5. You have not withdrawn your EPS balance before retirement.

Regardless of having changed employers, as long as you have transferred your EPF account correctly, your years of service are counted cumulatively.

Key Benefits of Employee Pension Scheme (EPS)

1. Monthly Pension After Retirement: Employees continue to receive a monthly pension perpetually after turning 58 years old. In particular, this pension serves as a major income source to support employees after retirement.

‍2. Early Pension Option: Employees are permitted to walk away with an early pension after turning the age of 50, but this will incur a 4% slash on the amount for every year less than 58. For example, assuming you retire at 52, then your pension will suffer a slash of 24%.

‍3. Pension for Family (Survivor Benefit): In the event that he or she dies, the widow/children/nominee can qualify for a pension under set forth conditions.

Widow's Pension

Child Pension (up to 25 years of age)

Orphan Pension

Dependent Parent Pension (if no spouse/child)

4. Pension for People with Disabilities: An employee who is permanently disabled qualifies for a monthly pension even if they did not serve for 10 years.

5. Perpetual and Relocatable: EPS pension is perpetual for the member/spouse and relocatable (through UAN) as long as the pension pot is not withdrawn early.

How to Calculate Your EPS Pension?

The pension amount is calculated using this formula:

Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Where,

Pensionable Salary = Average of last 60 months' salary (max ₹15,000)

Pensionable Service = Total years in EPF scheme (max 35 years considered)

Example:

If you worked for 30 years and had an average salary of ₹15,000:

Pension = (15,000 × 30) ÷ 70 = ₹6,428.57 per month

How to Claim EPS Pension?

You should be aware that you can claim your EPS pension by:

1. Complete Form 10D (through the UAN portal or via your employer)

2. Have your KYC, Aadhaar and bank accounts appropriately linked.

3. Keep an active UAN with a record of your service history.

You will start receiving the pension after verification and submission once you reach retirement age.

Can You Withdraw an EPS Amount?

Yes, but only under particular scenarios:

1. You may withdraw EPS by Form 10C if you leave the job before 10 years of service.

2. You can’t withdraw EPS if you are 10 years or older; only a pension is permitted after retiring.

Latest Updates on EPS (As of 2025)

1. Higher Pension Option: Following the Supreme Court’s decision, employees are permitted to select higher pension options by paying more than the mandatory cap of ₹15,000 (i.e., over ₹15,000). This application needs to be filed with the employer’s approval.

2. Digitization and UAN Linking: Claim settlement under EPS is now more efficient because of the complete digitisation of records as well as the use of Aadhaar-based verification.

Conclusion

The Employee Pension Scheme (EPS) is one of the most vital components of an Indian employee’s retirement plan. It guarantees a fixed income payable every month, caters to chronic illness and family pensions, and is included within the EPF scheme by default. Knowing what EPS benefits you have enables better planning, which in turn ensures free living during later stages of life.

However, if you are employed as a staff member, ensure that your UAN is active, your EPF account is current, and your KYC is linked. This will simplify the pension claim process when the time is appropriate.

FAQs

Q1. Is EPS contribution mandatory?

Indeed, every employee that EPF covers falls under this category. 8.33% of the salary that is withheld from the Employer’s PF EDA Account EPS comes from the employer’s contribution.

Q2. Can I opt out of EPS?

You cannot opt out of EPS since it is a mandatory subsystem of the EPF scheme unless you are a new employee earning above ₹15,000 and not logged into EPF.