EPFO-95: A Lifetime of Support After Service
The Employees' Provident Fund Organisation (EPFO) in India manages the Employees' Pension Scheme (EPS) 1995, also known as EPFO 95. It provides pension benefits to employees working in the organised sector.
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Key Features of EPFO 95 (EPS 1995):
- Eligibility for EPFO 95: Employees covered under the EPF Act with a basic salary (including DA) of up to ₹15,000 per month.
- Contribution: Employers contribute 8.33% of the employee's salary (up to ₹1,250 per month) to EPS.
- Government Support: The government contributes 1.16% of the employee's salary.
- Minimum Pension: The minimum monthly pension is ₹1,000.
- Full Pension Age: Employees become eligible for a full pension at 58 years (can withdraw at 50 years with a reduced amount).
- Pension Calculation:
The monthly pension is calculated as:
Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70
Where:
- Pensionable Salary will be the average salary of the last 60 months.
- Pensionable Service – Total years of eligible service under EPFO-95.
- Pensionable Salary: Average of the last 60 months' salary (up to ₹15,000 per month).
- Pensionable Service: Total years worked (minimum 10 years required).
Higher Pension under EPS 95:
- Employees who contributed based on actual salary (above ₹15,000) can now opt for a higher pension after a Supreme Court ruling.
- Those eligible must apply for the higher pension option through EPFO before the deadline.
The Employees' Pension Scheme (EPS) 1995 was introduced on 16th November 1995 by the Employees' Provident Fund Organisation (EPFO) under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. It replaced the earlier Family Pension Scheme (FPS) in 1971 to provide better retirement benefits to employees in the organised sector.
What is the purpose of EPFO 95?
The purpose of EPFO 95 (Employees' Pension Scheme, 1995 - EPS 95) is to provide financial security and stability to employees in the organised sector after retirement or in case of disability, ensuring a regular pension income for them and their families.
Key Objectives of EPS 95:
- Retirement Pension: Provides a lifelong pension to employees after retirement (age 58).
- Family Pension: Ensures financial support to the spouse, children, or dependent parents in case of the employee's death.
- Disability Pension: Offers a monthly pension to employees who become permanently disabled during service.
- Early Pension: Employees can opt for an early contribution from age 50, with a reduction of 4% per year before 58 years.
- Minimum Pension Guarantee: This guarantee provides a minimum pension of ₹1,000 per month, even if the contribution is low.
It helps ensure social security for workers, reducing financial dependency in old age or unfortunate circumstances.
Who is eligible for EPFO 95?
Eligibility for EPFO 95 (EPS 95)
An employee must meet the following criteria to be eligible for Employees' Pension Scheme (EPS) 1995:
1. Mandatory Eligibility:
- Must be a member of the Employees' Provident Fund (EPF).
- Must complete at least 10 years of service. Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70.
- Must have attained 58 years of age to receive a full pension.
2. Optional Early Pension:
- Employees can withdraw pension from age 50, but with a 4% reduction a year before 58.
3. Salary Criteria:
- The EPFO automatically covers employees who joined before September 1, 2014, and a monthly basic salary (including DA) of ₹15,000 or less.
- Employees earning above ₹15,000 can opt for a higher pension under recent EPFO guidelines.
4. Benefits for Family & Dependents:
- Spouses & children receive a family pension if the employee passes away.
- Dependent parents receive pension benefits if no spouse or children survive.
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An employee automatically joins EPS 95 after joining an organisation covered under the EPF.
Steps to Join:
- Join an EPF-Registered Organisation
- The employer registers the employee with the EPFO.
- Any organisation with 20 or more employees must provide EPF benefits.
- Employer Creates EPF Account
- The employer generates a Universal Account Number (UAN) for the employee.
- The employer deducts 12% of the employee's salary for EPF.
- Employer Enrolls Employee in EPS 95
- The employer redirects 8.33% of the EPF contribution (up to ₹1,250 per month) to EPS 95.
- Employees earning a basic salary (including DA) up to ₹15,000 per month automatically qualify.
- Employees earning above ₹15,000 can choose a higher pension under recent EPFO rules.
- Employee Completes Service Period
- The employee must complete at least 10 years of service to qualify for a pension.
Can self-employed individuals join EPFO 95?
No, self-employed individuals cannot join EPS 95 because the scheme applies only to employees in organisations covered under the Employees' Provident Fund (EPF).
Why Self-Employed Individuals Cannot Join EPS 95?
- EPFO 95 requires an employer-employee relationship.
- Only registered employers can contribute to EPF and EPS on behalf of employees.
- Self-employed individuals do not receive employer contributions, making them ineligible for EPS 95.
Alternative Pension Options for Self-Employed Individuals:
- National Pension System (NPS) – Offers a government-backed retirement plan.
- Public Provident Fund (PPF) – Provides tax-free returns with long-term savings benefits.
- Atal Pension Yojana (APY) – Offers a fixed pension for individuals in the unorganised sector.
- Mutual Funds & Fixed Deposits – Provide flexible investment options for retirement planning.
How are contributions made under EPFO 95?
Contributions Under EPFO 95 (EPS 95)
Employers contribute to EPS 95 on behalf of employees. Employees do not contribute directly.
Breakdown of Contributions:
- Employee's Contribution to EPF
- The employee accords 12% of their basic salary + DA to the Employees' Provident Fund (EPF).
- No direct contribution goes to EPS 95.
- Employer's Contribution to EPF and EPS
- The employer contributes 12% of the employee’s salary.
- The employer splits the contribution as follows:
- 8.33% (up to ₹1,250 per month) goes to EPS 95.
- The remaining amount goes to EPF.
- Government's Contribution
- The government adds 1.16% of the employee's salary (up to ₹15,000) to support EPS.
Example Calculation (For ₹15,000 Basic Salary)
- Employee’s EPF Contribution (12%): ₹1,800
- Employer’s Total Contribution (12%): ₹1,800
- To EPS (8.33%): ₹1,250
- To EPF (Remaining amount): ₹550
- Government Contribution (1.16%): ₹174
- Employee’s Contribution: 0% (Employees do not contribute to EPS 95)
Who Contributes to EPS 95?
Only the employer and the government contribute to EPS 95. The employee does not contribute directly.
Breakdown of Contributions:
- Employer contributes 8.33% of the employee’s basic salary + DA (up to ₹15,000 per month).
- Maximum employer contribution: ₹1,250 per month.
- The government contributes 1.16% of the employee’s basic salary + DA (up to ₹15,000 per month).
- Maximum government contribution: ₹174 per month.
- The employee does not contribute to EPS 95.
What are the key benefits provided under EPFO 95?
Key Benefits of EPFO 95 (EPS 95)
1. Monthly Pension After Retirement
- Employees receive a lifelong pension after completing 10 years of service and reaching 58.
- Employees can opt for early benefits from 50 years, with a 4% reduction per year before 58.
2. Family Pension
- The spouse and children receive a monthly pension if the employee passes away.
- Children receive a pension until they are 25 years of age.
- Disabled children get a lifelong pension.
3. Disability Pension
- Employees who become permanently disabled during service receive a monthly pension.
- They do not need to complete 10 years of service to qualify.
4. Minimum Pension Guarantee
- The scheme guarantees a minimum pension of ₹1,000 per month.
5. Widow and Orphan Pension
- The spouse receives 50% of the employee’s last drawn pension.
- Orphans receive 75% of the widow’s pension.
How does EPFO95 support employees after retirement?
EPFO-95 (Employees' Pension Scheme 1995) supports employees after retirement through the following benefits:
- Monthly Pension – Retired employees receive a lifelong pension based on their pensionable salary and years of service.
- Spouse & Dependent Benefits – The spouse and eligible children receive a family pension after the pensioner's death.
- Disability Pension – Employees who become permanently disabled during service receive a pension, regardless of tenure.
- Early Pension Option – Employees can opt for a reduced pension from age 50 instead of 58.
- Minimum Pension Guarantee – The scheme ensures a minimum monthly pension, currently set at ₹1,000.
- Withdrawal Benefits – Employees who do not complete ten years of service can withdraw the pension amount with interest.
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| Pension improvement news |
Improve EPFO-95 with the following measures:
- Higher Minimum Pension – Increase the ₹1,000 minimum pension up to ₹7,500/- to ensure financial security.
- Flexible Contribution Options – Allow voluntary higher contributions for better post-retirement benefits.
- Pension Linked to Inflation – Implement periodic revisions based on inflation rates.
- Simplified Claim Process – Reduce paperwork and improve digital accessibility for faster settlements.
- Survivor Benefits Expansion – Extend pension coverage to dependent parents and unmarried daughters.
- Early Pension with Better Rates – Reduce the penalty for opting for an early pension before 58.
- Portability Across Sectors –Seamless pension transfer for employees switching jobs across sectors.
Enhancing EPFO-95 with higher pensions, flexible contributions, and seamless processes will strengthen financial security for retirees. Simplifying claims, adjusting pensions for inflation, and extending survivor benefits will make the scheme more effective for employees and their families.