The Employee Pension Scheme (EPS) and the National Pension Scheme (NPS) are two different pension schemes in India. Let’s explore each scheme and highlight their key features:
Employee Pension Scheme:
The Employee Pension Scheme is administered by the Employees Provident Fund Organization (EPFO). It is applicable to employees working in establishments covered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Here are the key features of EPS 95
EPS 95
a. Eligibility: Employees who are members of the Employees Provident Fund (EPF) are eligible for the EPS 95.
b. Contributions: Both the employer and the employee contribute a fixed 12 percentage of the employees basic salary plus dearness allowance (DA) to the EPF. Out of the employer’s contribution, a portion goes towards the Employee Pension Scheme.
c. Pension Benefit: The Employee Pension Scheme provides a pension benefit to eligible employees upon retirement or reaching the age of 58. The pension amount depends on the employees years of service and average salary.
d. Pension Calculation: The Employee Pension Scheme 95 pension amount is calculated based on a below formula that considers the employees pensionable service and pensionable salary.
Formula: Pensionable salary x No. Of years service ÷ 70
Pensionable salary: average of last 5 years (60 months) salary (only Basic + DA)
No. Of years service:
1. Below 20 years service actual service calculated
2. Above 20 years service 2 years added as bonus
3. Maximum 35 years of service is considered for calculations
e. Withdrawal Options: Employees can choose to receive a monthly pension or a lump sum amount, subject to certain conditions.
Read more: Should I opt for EPS 95 Higher Pension Scheme
NPS
National Pension Scheme:
The National Pension Scheme is a voluntary pension scheme introduced by the Government of India. It is regulated and managed by the Pension Fund Regulatory and Development Authority (PFRDA). Here are the features of National Pension Scheme.
a. Eligibility: National Pension Scheme is open to all Indian citizens, including employees from the public, private, and unorganized sectors.
b. Contributions: Both the employee and the employer can contribute to the National Pension Scheme account. The contributions are invested in various asset classes such as equities, government securities, and corporate bonds, based on the employee’s preference.
c. Pension Benefit: Upon retirement or reaching the age of 60, subscribers can withdraw a certain portion of the accumulated corpus as a lump sum, while the remaining amount is utilized to purchase an annuity from an insurance company, which provides a regular pension.
d. Flexibility: National Pension Scheme offers flexibility in terms of choosing investment options and fund managers. Subscribers can switch between investment options and fund managers based on their risk appetite and investment goals.
e. Tax Benefits: National Pension Scheme provides tax benefits under various sections of the Income Tax Act, such as deduction on contributions and tax exemption on withdrawal up to a certain limit.
It’s important to note that Employees Pension Scheme and National Pension Scheme are distinct schemes with different eligibility criteria, administration, and features. Employees Pension Scheme is primarily linked to employment under the EPF Act, while National Pension Scheme is a voluntary scheme available to all Indian citizens.
Read more: NPS Intrest Rate 2023 and Extra Tax Benefit
Conclusion: so which is best Employees Pension Scheme or National Pension Scheme it is depends on your financial requirements after Retirement.
1. Can I have both NPS and EPS account?
Ans: Yes you can open both accounts for EPS you should be member of EPF and for nps all Indian citizens can open the account.
2. Can I change EPS to NPS account?
Ans: Yes but you need to give a transfer letter to authorized EPFO to transfer amount from your EPS Account to NPS account
Disclaimer: This article is only for information and knowledge purposes there is no advice to purchase or investment please consult your financial advisor before investment
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