Provident fund (PF) contribution represents passive savings for a salaried employee. For most workers, 12 per cent of the simple salary goes into the PF account every month. An equal percentage is also contributed by the employer. However, in most situations, not the complete 24 per cent of PF contributions lands up in the employees’ provident fund account (EPF) every month. If you look at your PF statement or the PF passbook, you will discover separate entries for workers and employer’s contribution towards the PF account. In addition, there is a further column that shows contribution towards workers pension scheme (EPS). Both EPF and EPS are below the purview of the Employees’ Provident Fund Organisation (EPFO).
EPF is only one portion of the employee’s all round retirement corpus even though EPS is the other portion.
The employee will need not contribute towards EPS but out of the employer’s contribution, a specific percentage is diverted towards EPS. With simple salary (for pension purposes) capped at Rs 15,000, 8.33 per cent of the salary is diverted or place into EPS. This indicates, irrespective of a greater simple salary (above Rs 15,000), every month Rs 1250 of employer’s contribution is place into EPS.
The quantity of month-to-month pension depends on the quantity of years of service and a fixed formula. On retirement, soon after a minimum period of ten years of service, the minimum pension per month is fixed at Rs 1,000 even though the maximum month-to-month pension quantity is Rs 7,500. To assure that one gets the credit for the quantity of years worked, make sure to opt for ‘scheme certificate’ which aids EPFO retain a record of your service period.
The working of EPS is not related to EPF and neither does EPS contributions earn any interest. Whatever goes into the EPS, the complete corpus stays with the government and the employee begins receiving pension soon after retirement. When an employee adjustments jobs, EPF gets transferred with the new employer, even though the UAN remains the exact same. But soon after the job transform, EPS contribution stays with EPFO. The employee has the choice to either withdraw EPS funds or carry forward to the next job. This nonetheless, depends on the length of service and age of the employee.
If an employee has not completed ten years of continuous service, he can either withdraw the EPS quantity, or take the ‘scheme certificate’. On joining the new employer, submit the scheme certificate to EPFO via the new employer. Once ten years are completed, the withdrawal advantage stops and one can only take the scheme certificate from EPFO by filing the exact same Form 10C.