Pension Schemes of EPFO

1. Family Pension Scheme 1971 (FPS-71).

o If member is alive, no pension
o If member is not alive , pension to spouse only
o Pension amount was also very small as the contribution collected to
the scheme is only 3.34% (1.67%x2) of the Wages
o This scheme ceased when the EPS-95 came into existence

2. Employees Pension Scheme 1995 (EPS-95).

o If member is alive, pension to member
o If member is not alive, Pension to to spouse and two children below
25 years of age
o This scheme is applicable to all members who joined EPF after
15.11.1995

So we may think only about EPS-95 here onwards

Employees' Pension Scheme 1995 (EPS-95)
Funding | When to apply for pension | How Pension calculated |
Commutation | Capital Return | Types of Pensions | More than one
Pension | Death Case | Not Opted yet | I want money back, not
pension. | Pension is less, why?

Funding of the Pension Scheme

An amount equal to 8.33% of Wages is pooled into the EPS from the Employer's
contribution. ie., If a PF member gets Rs. 1000/- as monthly wages and he and his
employer contributes 10% each, Rs. 100 + Rs.17 (=117) goes to Provident Fund
and Rs. 83 goes to Pension Fund. Govt. also contribute to this Welfare Scheme at
the rate of 1.16% of wages

Valuating the Inflow and outflow to the EPS annually, each year Pension Relief is
declared. During 2002-2003, 4% of Pension Relief was declared. (an increase of
4% in Pension amount).

Four situations When Pension can be applied for :

1) On superannuation The member can continue in service while

receiving this pension
• Age 58 years or More and On attaining 58 Years of age, a EPF
member cease to be a member of EPS
• atleast ten years of service automatically.
2) Before superannuation The member should not be in service.

• Age between 50 and 58 years and

• atleast ten years of service

3) Death of the member Death while in service or.
Death while not in service
4) Permanent disability Permanently and totally unfit for the
employment which the member was doing
at the time of such disablement
No pensioner can receive more than one EPF Pension.

Calculation of Pension:

Those who joined AFTER 15.11.1995 Those who joined BEFORE 15.11.1995
Here, the formula of calculation of pension
is:

Past Service benifit + Pensionable service

benefit - Proportionate reduction

Here, the formula of calculation of pension subject to minimum pension specified for
is similar to that of a Govt. Employee. ie., each group. ( X - Rs.800 , Y - Rs.600, Z -
Average Salary X Service Rs.500 )
70
These three categories of members are
Maximum service for the calculation of defined with reference to their age as on
service is 35 yrs. If a member has 16.11.1995 as follows:
maximum service, pension will be:
Average Salary • X : those who have not attained 48
70 years
• Y : those who have attained 48 years
The Average Salary here refers is named as but less that 53 years ; and
pensionable salary in the scheme. It is • Z : those who have attained 53 years
arrived by considering the average or more.
contributing salary preceeding 12 months
from the date of exit Past service benefit: Portion of pension
amount because of your service before
Eventhough you may be drawing 15.11.1995(For the calculation of this you
Rs.20,000/- as salary per month, your have to refer 2 tables)
company need to contribute only Rs. 541/- Pensionable Service Benefit: Portion of
towards pension fund. pension amount because of your service
after 15.11.1995(same as the calculation of
pension who joined after 15.11.1995)
Proportionate reduction: if the past
service is less than 24 years and past service
benifit + Pensionable service pension is less
than Rs.500/-
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)

Commutation

You can opt for commutation of pension and percentage of commutation.

maximum% of commutation is 33.33%. In this case, the pension will be reduced
by 33.33% and you gets 100 times of commuted value as lump sum. eg. If original
Pension is Rs.1000/-, if opted for 33.33% commutation, the pension will be Rs.
667 and the lump sum amount is Rs. 333 x 100 = 33300. The commutation will
not cease and the original pension will not be restored. If commuted, the pension
after commutation will be taken as ORIGINAL Pension for the calculation of
lumpsum amounts related to Capital Return.

Capital Return
Three type of Capital Return Options are there:(The Capital Return Amounts are
ADDITIONAL to all other usual benefits).
Option No. 1 [under para 13(1)(1)]
On Member Pensioner's
If opted, 10% of pension will Death, Rs. 1000 x 100
Widow pension & 2
be reduced. If original Pension(hundred times of pension) as
Children Pension will be
is Rs. 1000/-, you get monthly lump sum will be paid to
paid as usual.
pension of Rs. 900/-. nominee (Nominee can be
anyone including spouse).
Option No. 2 [under para 13(1)(2)]
On Member and on the death or
If opted, 10% of
Pensioner's Death, remarriage of widow,
pension will be
80% of pension will Rs. 1000 x 90 (ninety Widow pension & 2
reduced. If original
be given to Widow times of pension) to Children Pension will
Pension is Rs. 1000/-,
additional to her nominee as lump sum be paid as usual.
you get monthly
entitled widow (nominee can not be
pension of Rs. 900/-.
pension. spouse).
Option No. 3 [under para 13(1)(3)]
If opted, 12.5% of
pension will be On attaining this 20
reduced. If original In case the member years, Rs. 1000 x 100
Pension is Rs. 1000/-, dies before 20 years, (hundred times of
Widow pension & 2
you get monthly the pension will be pension) will be
Children Pension will
pension of Rs. 875/-. paid to his nominee given to the member
be paid as usual.
This amount will be for the balance if he is alive,
paid for a fixed period. otherwise to his
period of 20 years nominee.
only.

Types of Pension

Type of Pension Description

• If age is 58 years or more
Superannuation
• 20 years or more service
• If age is between 50 and 58 years
Retirement
• 20 years or more service
• If age is above 50 years
Short Service (Cessation)
• 10 to 20 years of service
Death While in Service • Atleast 1 months service
• Age less than 58 years
Death Away from Service (Now not in
service) • Holding valid Scheme certificate or
proof of service
• If no family member,Father or
Mother
Nominee Pension
• Member can nominate a person
while in service
 • If no family member (ie, no
spouse,offspring)
Parent Pension
• If no Nomination and to one of the
Dependent Parent if alive
• Certificate to the effect of permenent
and 100% disability should be
Disability Pension produced

• Commutation not applicable

More detailed calculation of Pension and Tables relating to the calculation

of Pension

For a member who joined EPF before 15.11.1995 have 3 components in Pension
calculation:
(a)Past Service Benefit (b)Pensionable Service Benefit (c)Proportionate
Reduction
For those who joined after 15.11.1995, only the 2nd component, viz., Pensionable
Service Benefit is applicable

1) Past Service benefit: depends upon the wage as on 15.11.1995 and the
service rendered in FPF '71 ( i.e. upto 15.11.1995 ) is as shown below:
TABLE - A
Past Service Benefit in Rs Benefit in Rs
On Member Pensioner's
Death, Rs. 1000 x 100
Widow pension & 2
(hundred times of pension) as
Children Pension will be
lump sum will be paid to
paid as usual.
nominee (Nominee can be
anyone including spouse).
Upto 11 years 80 90
More than 11 years but upto
95 105
15 years
More than 15 years but less
120 135
than 20 years
Beyond 20 years 150 170
The above amount is the benefit payable on completion of 58 years of age as on
16.11.1995.
For the calculation of pension benefits before 58 years (if a member do not
complete 58 years of age on 15.11.1995, his past service benefit will be increased
by the below factor - Early pension cases ) the above benefit is multiplied by the
TABLE - B factor to arrive at the past service benefit.
TABLE - B

If Years to 58 of age from 15.11.1995 is: then factor is:

less than 1 year 1.049
less than 2 year 1.154
less than 3 year 1.269
less than 4 year 1.396
less than 5 year 1.536
less than 6 year 1.689
less than 7 year 1.858
less than 8 year 2.044
less than 9 year 2.248
less than 10 year 2.473
less than 11 year 2.720
less than 12 year 2.992
less than 13 year 3.29
less than 14 year 3.621
less than 15 year 3.983
less than 16 year 4.381
less than 17 year 4.819
less than 18 year 5.301
less than 19 year 5.810
less than 20 year 6.414
less than 21 year 7.056
less than 22 year 7.761
less than 23 year 8.537
less than 24 year 9.390
1) Past Service benefit:
Pensionable Salary X Pen. Service
70

subject to minimum of Rs.335, Rs. 438, Rs.635 for receiving early pension ( before
58 years ) for date of commencement of pension between 01/04/1993 and
15/11/2000, 16/11/2000 and 15/11/2005, 16/11/2005 respectively
AND
subject to minimum of Rs.635, Rs.438, Rs.335 for receiving pension on or after 58
years for date of commencement of pension between 01/04/193 and 15/11/2000,
16/11/2000 and 15/11/2005 , 16/11/2005 respectively.

(If member has joined after 15.11.1995, only Pensionable Service Benefit is
applicable)

3) Proportionate reduction: arises if the past service is less than 24 years and
aggregagte pension calculated is less that Rs.500/-

Pension in case of Member's Death

Death when NOT in service

• If a member dies even when not in service, holding a valid scheme

certificate and not completed 58 years of age.
• If unmarried, pension to nominee or to dependent parent is payable only
when the member has rendered 10 years of service

Death While in Service

• Member should complete atleast one month's service.

• If unmarried, pension to nominee or to dependent parent is payable without
any other conditions

Note :
 • In case of died member having family, pension is payable to (1) the spouse
and (2) two children below 25 years of age. When a child reaches 25 years
of age, the third child below 25 yrs of age will be given pension and so on.
=>If the child is disabled, he may get pension till his death.
=>In any case, only 2 children will receive pension at a time.

• In case of member not having family, pension is payable to single

nominated person.
=> If not nominated and having dependend parent, pension is payable first
to Father and then on father's death to Mother.

If You have not yet opted for Pension Scheme

You can not be a Pension Scheme Member If:

• you settled your EPF Account before 16.11.1995

• you were not a member of Old Family Pension Scheme-1971

You can be a Pension Scheme Member If:

• you were a member of Old Family Pension Scheme-1971.

I do not want this pension. I want money back

• If your total service is less than 9.5 years, you can apply for Pension Fund
Money back (Withdrawal benefit). i.e, as you are not entitled for pension,
you may withdraw that amount.
• The Withdrawal benefit calculation (as in the case of Pension Calculation) is
depending on Average salary and total service, NOT related to your actual
Balance in Pension Fund.

EPF Pension scheme is very liberal insurance to your life after job. In case you die
before 58 years of age after contributing to EPF Pension scheme for atleast 1 year,
your family is entitled for Pension. You can add services at different companies by
applying for Scheme certificate , and if your total service is atleast 10 years, you
can get pension from the age of 50 years on wards.

Pension is less, why?

Pension depends on

1. Your contribution to Pension Fund and

2. your service

If your contribution is less, your pension will be less

Contribution to Pension Fund was only 3.34% of wages before 16.11.1995.(From
16.11.1995, it is 8.33% of Wages). You may be drawing very high salary, but your
contribution to Pension Fund will be only Rs. 541/- max. This is because, as per
EPF scheme, employer has to remit 8.33% of actual salary or of Rs. 6500/-
whichever is minimum. (Your company can contribute more with permission -
else there is no use, while calculating pension, normally, wages will be limited to
6500/- as per prevailing laws)

eg: ( we may consider a maxium pension case - this will occur only after
16.11.2025 [16.11.1995+35 years])
Your averagevsalary=20,000/- per month
Your service after 15.11.1995=35 years
Then your pension is 6500/2 = Rs. 3250