Govt makes major reform in EPS pension scheme

• Follow

New Delhi: People who change jobs frequently, often find it easy to withdraw their PF money. However, those with less than six months of contribution face difficulties in getting their pension amount back. The government has now made a significant change to this rule. Even if the contribution period is less than six months, the deducted amount for the pension can be claimed.

The Indian government has taken this move aimed at benefitting employees contributing to the Employees’ Pension Scheme (EPS). Individuals who have contributed for less than six months, upon leaving their job, can now withdraw their EPS funds — a privilege previously unavailable to them.

What is EPS?

Managed by the EPFO, it is a pension scheme that deducts 12% of an employee’s basic salary and dearness allowance (DA) each month. This scheme divides the amount into various headers. Allocating 8.33% to EPS and transferring the remainder to the employee’s Provident Fund (PF) account. The EPS portion contributes towards the employee’s pension benefits.

Until now, employees leaving a job before completing six months of contribution were not eligible for withdrawal benefits under the EPS scheme. However, the recent government reform has rectified this issue, ensuring that even those with less than six months’ contribution can now withdraw their EPS funds.

Another significant change introduced by the government is the calculation method for pension benefits. Previously, pension calculation rounded off service duration to the nearest year. For instance, an employee with 11 years and 5 months of service would only receive credit for 11 years. Leading to a loss of contributions made during the remaining 5 months. Under the new rules, pension calculations will be based on the actual contribution period. It will ensuring fair treatment and accurate benefits for employees.

These reforms are expected to benefit millions of employees. Esepcially the ones who previously faced restrictions on accessing their EPS contributions due to short service durations. The government’s proactive steps towards improving EPS, highlight its commitment towards enhancing social security benefits for all employees covered under the scheme.

Employees who’ve left their job in only five months and faced rejection of their pension claim, would now be eligible to withdraw her EPS contributions. This change marks a positive shift towards greater inclusivity and support for employees’ financial security.