Detailed Information on What is Pension contribution in EPF and how it applies and works to EPFO account holders with % of pension and eligibility…
Employee Provident Fund is the future savings account applied to every employee by EPFO. Since 2014 the Employee pension scheme added to EPF, which allows the employee to receive a pension after maturity age. Employee Provident Fund distributed based on the Basic salary which at least 12% and the same applied to the Pension contribution.
There is minimum amount and as well a certain percentage that taken into consideration for the Pension Contribution in EPF along with the Provident fund. This amount wholly accumulated in PF account which may seen using the employee-specific UAN number.
Percentage of Pension Contribution
A percentage of 12 will be deducted from the employee salary basis, which will be on a monthly basis. Of these 12 percent the 3.67 percent will be taken towards Pension Contribution and remining will be forward to Provident fund as well for the admin charges.
Employee Pension Scheme has a minimum requirement of INR 1000 for the scheme which increase based on the contribution from Basic salary.
Employees having a basic salary above 15000 require to create EPF and EPS accounts for their savings.
Pension Contribution Eligibility
There is certain eligibility which laid towards the employee to get enroll with the Pension Contribution scheme.
- Individuals must member of EPF with having a UAN number
- To avail the Pension Contribution benefits, an individual must enroll for least 10 years
- Individuals must have at tin an age of retirement which determined by EPF office
- Payment of Pension Contribution every month is mandatory to continue scheme
How does EPF Pension Contribution Works
The Employee Pension Contribution is applicable for every individual who is working in an industry or company having an account with EPFO. Earlier it entitled to the government employee, who would receive a fixed income named as pension after their retirement.
Thus for the same scheme for all groups of employees, the PF deduct on the verge of around 4% from the basic salary along with the EPF contribution, these Pension Contribution in EPF made from salary deduction may tax free and will accumulate in your pension account.
Individuals will receive the pension once they have retired from the service. This Pension Contribution secures the individual life even after they have retired and will continuously bring them good income based on applicable interest rate.
EPF Pension Contribution Calculation
The Employee Pension Scheme does have some basic rules which must follow to calculate the amount of contribution. Every individual can use below standards to know their Pension Contribution made and received.
- If employee in service for more than 6 months, then it will rounded to 1 year
- If employee has worked for less than 6 month in service, then it will rounded to zero
- Extra 2 years may add, if employee a service for more than 20 years
Employee Pension Scheme Formula= Pensionable Salary * Number of Years Worked / 70
Here Pensionable salary is the monthly salary for last 12 months before the date of retirement
Number of years worked is the total tenure of service from employer
At what age is an individual eligible to receive Pension Contribution?
The individual will be eligible to receive the Pension Contribution once they have met the retirement age 58 years and as well by filling form 10 D after the age of 50 years. The employee can receive the Pension Contribution as monthly pension.
Will EPS lapse if an individual does not complete 10 years of service?
The individual not eligible to receive the Pension Contribution scheme benefits if they have not worked for 10 years. In such cases, individual can ask for the refund of pension contribution made for the particular years in service
Can I add a nominee in the Employee Pension Scheme Account?
Individuals who have an account in EPFO can add a nominee for pension scheme and as well for provident fund account. The nominee may same or different in these two schemes which may clearly determined during filling the nomination form.