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Employees’ Pension Scheme

Posted by Prashant Shah on March 18, 2011

This is a pension scheme for survivors, old aged and disabled persons. This scheme came into effect from 16th Nov. 1995. The earlier family pension scheme has been replaced with this new scheme. This scheme caters for three types of contingencies:
  1. Survivor pension: If death occurs during service period
  2. Old age pension: Superannuation
  3. Permanent disability: In the event of member suffering permanent disability while service


  1. The employer’s contribution of 8.33% will be diverted to the fund of pension scheme
  2. Employee is not required to contribute at all in this scheme
  3. The central Government also contributes at the rate of 1.16% of the pay of the member of EPS and credit the contribution to Employee’s Pension Fund
  4. The 8.33% is on maximum pay of Rs. 6500
  5. If the employers are paying contribution on salary in excess of Rs. 6500, the excess contribution will be credited to PF and not to the Pension Scheme



Pension shall be calculated as per the following formula:


Pensionable Salary: Average salary drawn in period of 12 months preceding the date of exit membership of employee’s pension fund
Pensionable Service: The service rendered by the member for which contributions have been received or receivable
  1. If the service is rendered for a period which is more than 20 years, the member’s pensionable service shall in all cases be increased by adding 2 years
  2. E.g. 21 years of pensionable service shall be increased to 23 years

Under New Scheme:

  1. Superannuation/ Retirement/ Short-service pension under the new scheme will be payable on fulfilling:
  2. Minimum 10 years eligible service
  3. Attaining age of 58 years
  4. On ceasing employment earlier than 58 years, pension may be availed by the member at his option
  5. This may be before attaining the age of 58 years but not below 50 years
  6. Early pension is subject to discount factor as per table D
  7. This restriction are not applicable on pension payable on disablement or death

Widow Pension

In case the member dies

  • While in service
  • After death of exit but before attaining the age of 58 and before commencement of pension payment
  • Widow pension shall be equal to maximum of
    1. Monthly member’s pension
    2. Rs.450
    3. Amount indicated in Table C of the scheme

Note: If the member dies after commencement of monthly pension, widow pension shall be equal to 50% of the monthly member’s pension subject to minimum of Rs.450 p.m.

Children Pension

  1. The surviving children of the deceased member shall be entitled to monthly children pension, in addition to widow pension, equal to 25% of widow pension, subject to minimum of Rs.150 pm to each child
  2. Monthly children pension shall be payable until the child attains the age of 25 years
  3. This pension shall be payable to maximum 2 children running from eldest to youngest
  4. In case the deceased member is not survived by any widow, but is survived by children, the surviving shall be entitled to monthly orphan pension equal to 75% of the widow pension, subject to minimum of Rs.250 pm to each child

Commutation of Pension

  1. A member eligible to pension, may opt to commute up to maximum of 1/3rd of his pension
  2. Commuted value shall be 100 times the monthly pension
  3. Balance pension shall be payable on monthly basis.

Tax Treatment:

If he is in receipt of gratuity: 1/3 of (commuted pension/%of commutation) × 100

If he is not in receipt of gratuity: ½  of (commuted pension/%of commutation) × 100

One Response to “Employees’ Pension Scheme”

  1. vinay said

    sir, is the above entry upto date or are there any latest amendments? Please inform.

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