The Employees’ Pension Scheme (EPS) is a retirement benefit plan that is part of the Employees’ Provident Fund (EPF) system in India. It is designed to provide pension benefits to employees who have contributed to the EPF for at least 10 years. This aims to offer financial security to employees after their retirement or in the event of their death or disability.
The EPS is managed by the Employees’ Pension Fund Organisation (EPFO), which has recently released a circular stating that eligible employees and pensioners must provide written consent within three months to transfer funds from their EPF account to the EPS account.
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Under the EPS, both the employer and the employee contribute a certain percentage of the employee’s wages to the pension fund. The employer contributes 8.33 per cent of the employee’s wages, up to a maximum of Rs 1,250 per month, while the employee contributes 12 per cent of their wages towards the EPF, with the entire employee contribution going towards the EPF and a portion of the employer contribution going towards the EPS. The pension amount under the EPS is determined based on the employee’s length of service and the average salary earned in the last 12 months before the exit date from employment.
Now, regarding the question of exiting after applying for a higher EPS pension, it’s important to note that once an employee has applied for the EPS pension, they cannot exit or withdraw from the scheme.
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Experts have stated that written consent is necessary for the diversion or deposit of funds to apply for a higher EPS pension. But this cannot be construed as an exit window, as there is no clarity from the EPFO’s side.
EPS pension is a lifelong benefit provided to eligible employees. So once the pension starts, it continues until the death of the pensioner and is then transferred to the spouse or dependent children as a family pension. Therefore, it is not possible to exit the EPS after applying for a higher pension.
On the other hand, EPS does provide options for commuting a portion of the pension amount, wherein a lump sum can be withdrawn instead of a regular monthly pension. But this commutation option comes with a certain set of restrictions and is subject to specific conditions and calculations only.
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