A salaried employee has their passive savings going into the provident fund (PF). Generally, 12 per cent of the employees’s basic salary is credited into the PF account every month. The employer also contributes an equal percentage. In most cases, the total 24 per cent of the contributions does not get entered in the employees’ provident fund account (EPF), every month.
The PF statement or the PF passbook will reflect separate entries for contributions by employees and employer towards the PF account. Another column reflecting contribution towards employees pension scheme (EPS) is also seen on the statement. EPF and EPS are both inside the scope of the Employees’ Provident Fund Organisation (EPFO).
One portion of the employee’s overall retirement sum is EPF, while the other part is EPS. A certain percentage out of the employer’s contribution is diverted towards EPS. Since the basic salary (for pension purposes) is limited at Rs 15,000, 8.33 per cent of it is put into EPS. Every month, Rs 1250 of the employer’s contribution is put into EPS, regardless of higher basic salary.
The monthly pension amount is based on the number of years of service as well as a fixed formula. After a minimum tenure of ten years, the minimum monthly pension on retirement is fixed at Rs 1,000. The maximum pension every month is Rs 7,500.
It must be noted that Opt for ‘scheme certificate’ to ensure you get the credit for the number of years of service. EPFO can maintain a record of your working period.
The functioning of EPS and EPF are not similar. EPS contributions do not earn any interest. All the amount in EPS stays with the government and only after retirement, the employee starts getting pension. On the other hand, EPF gets transferred when an employee changes jobs, even though the UAN remains unchanged. After the job change, the employee can either withdraw funds in EPS or carry it forward to the next job.
An employee can withdraw the EPS fund or take the ‘scheme certificate’, if not completed ten years of service. After joining a new job, the scheme certificate can be submitted to EPFO via the new employer. The withdrawal benefit stops after the completion of ten years. One has to fill the same Form 10C in order to take the scheme certificate from EPFO.