The Employees' Provident Fund (EPF) and the Employees' Pension Scheme (EPS) are both essential components of an employee’s retirement savings in India. Both schemes serve the purpose of providing financial security after retirement. Also, they have distinct structures, benefits, and withdrawal rules.
Understanding the difference between EPF and EPS helps employees make informed financial decisions regarding their retirement planning.
What is EPF?
The Employees' Provident Fund (EPF) is a government-backed retirement savings scheme managed by the Employees’ Provident Fund Organisation (EPFO). It is mandatory for employees earning up to ₹15,000 per month in companies with more than 20 employees.
Key Features of EPF:
Employee and Employer Contributions:
Both the employee and employer contribute 12% of the employee’s basic salary plus dearness allowance to the EPF account.
Interest on Savings:
The EPF account earns a fixed interest rate, determined annually by the government.
Lump-Sum Withdrawal:
The accumulated amount, including interest, can be withdrawn at retirement or upon meeting specific conditions such as unemployment for two months.
Tax Benefits:
EPF contributions qualify for tax exemptions under Section 80C of the Income Tax Act.
Partial Withdrawals:
EPF allows partial withdrawals for emergencies like medical treatment, home purchase, or education expenses.
What is EPS?
The Employees' Pension Scheme (EPS) is a pension scheme under the EPF framework, designed to provide a monthly pension after retirement.
Key Features of EPS:
Employer Contribution Only:
Unlike EPF, employees do not contribute to EPS. Instead, 8.33% of the employer's 12% contribution goes into the EPS account (subject to a maximum of ₹1,250 per month).
Pension on Retirement:
Employees become eligible for a lifelong pension after completing 10 years of service and reaching 58 years of age.
Early Withdrawal or Scheme Certificate:
If an employee leaves the job before completing 10 years of service, they can either withdraw the 10C form for PF benefits or obtain a scheme certificate to carry forward pension benefits.
No Interest Earnings:
Unlike EPF, EPS does not accumulate interest over time.
Higher Pension Option:
Employees can opt to contribute their full salary to EPS for a higher pension, provided they meet the eligibility criteria.
Difference Between EPF and EPS
Here are few differences between EPF and EPS you should know:
Feature
| EPF
| EPS
|
Contribution
| Both employee and employer contribute
| Only employer contributes
|
Interest
| Earns annual interest
| No interest earned
|
Withdrawal
| Lump sum after retirement
| Monthly pension after retirement
|
Minimum Service Requirement
| No minimum service requirement for withdrawal
| Minimum 10 years of service for pension
|
Tax Benefits
| Contributions are tax-exempt
| Pension received is taxable
|
How to Check EPF Status and Balance Online?
Employees can check their EPF balance and status online through the EPFO Member e-Sewa portal or the UMANG mobile app. Here’s how:
Step 1. Log in to the EPFO Portal:
Visit the official EPFO website and enter your Universal Account Number (UAN) and password.
Step 2. Go to ‘View Passbook’:
This section displays the total contributions, interest earned, and balance.
Step 3. Use UMANG App:
Download the UMANG app, link your UAN, and check your EPF balance instantly.
Step 4. Missed Call or SMS Service:
Dial the EPFO missed call number 9966044425 or send an SMS EPFOHO UAN ENG to 7738299899 to receive balance details.
How to Check EPFO Claim Status Online?
To track the status of EPF withdrawal or transfer claims:
Step 1.
Visit the EPFO Portal and log in using your UAN and password.
Step 2.
Go to the ‘Track Claim Status’ Section under the ‘Online Services’ tab.
Step 3. Enter Claim Details:
Provide your PF account number or UAN to view the claim progress.
Step 4. Check Status:
The portal will display whether the claim is under process, approved, or settled.
Which One Should You Prioritize?
Both EPF and EPS play a vital role in financial planning, but they serve different purposes in ensuring financial security during and after employment.
EPF for Long-Term Savings
The EPF scheme acts as a long-term savings tool where both employees and employers contribute to a fund that earns interest over time. This accumulated amount provides employees with a lump sum upon retirement, ensuring they have sufficient funds for major expenses, such as healthcare, home purchases, or post-retirement travel.
EPS for Regular Pension Income
On the other hand, EPS is designed to provide a steady pension after retirement. Unlike EPF, EPS does not earn interest, but it ensures financial stability through a monthly pension, reducing the risk of running out of savings too soon.
Strategic Withdrawal Planning
Employees should carefully plan their withdrawals from both schemes to maximize benefits. Premature withdrawals from EPF may disrupt long-term savings growth, while withdrawing EPS contributions before completing 10 years of service may result in losing pension eligibility. Using financial planning tools like a pension calculator can help employees determine the best strategy for balancing immediate financial needs with long-term security.
Understanding the distinct advantages of EPF and EPS helps employees make informed decisions about their retirement and avoid unnecessary financial hardships.
Impact of Job Changes on EPF and EPS
Many employees change jobs multiple times during their careers. Understanding how job changes impact EPF and EPS is crucial:
EPF Balance Transfer:
Employees should always transfer their EPF balance to the new employer’s EPF account instead of withdrawing it, to maintain compounding benefits.
EPS Scheme Certificate:
If an employee has less than 10 years of service and switches jobs, obtaining a scheme certificate allows them to combine their pension benefits under the new employer.
Avoiding Premature Withdrawals:
Withdrawing EPS before completing 10 years of service may result in a loss of pension benefits.
Using a Pension Calculator for Retirement Planning
A pension calculator can help employees estimate their retirement savings and expected pension based on their contributions. By entering details like salary, contribution percentage, and years of service, individuals can assess their future pension benefits and make necessary financial adjustments.
Both EPF and EPS serve distinct yet complementary purposes. Employees should regularly review their contributions, check their balances, and plan their withdrawals wisely. By staying informed about pension plans and their eligibility criteria, individuals can ensure a secure and well-planned retirement. Additionally, using tools like a pension calculator and making strategic financial decisions regarding retirement plans and savings plans can further enhance long-term financial security.
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