In India, retirement planning often involves navigating the intricacies of the Employees' Provident Fund (EPF) and the Employees' Pension Scheme (EPS). Both are framed under the Employee's Provident Fund & Miscellaneous Provisions Act, 1952. While both are retirement benefit plans, they operate differently.
EPF: Building a Retirement Corpus
The Employees' Provident Fund (EPF) is a savings scheme designed to help employees accumulate a substantial corpus over their working years. Both the employee and the employer contribute to the EPF account, each contributing 12% of the employee's basic salary and dearness allowance. The contribution gets accumulated until the individual's entire working period, and the employee can withdraw a lump-sum amount with interest after retirement. The interest earned on EPF is calculated monthly and paid at the end of the financial year. For the financial year 2023-24, the rate of interest offered on the EPF account is 8.25%. 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: Ensuring a Steady Pension
The Employees' Pension Scheme (EPS) is designed to provide a pension to employees after retirement. Unlike EPF, the employee doesn't contribute to EPS directly. Instead, 8.33% of the employer's contribution (out of their total 12% contribution to EPF) goes towards EPS, up to a maximum of Rs. 1,250 per month. Employees are eligible for a lifelong pension after completing 10 years of service and reaching 58 years of age. The pension amount depends on the employee's salary and the number of years of service.
Key Differences
| Particulars | EPF | EPS | | ----------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | | Employee Contribution | 12% of basic salary and dearness allowance | Nil | | Employer Contribution | 3.67% of basic salary and dearness allowance paid to the employee | 8.33% of the basic salary and dearness allowance paid to the employee | | Eligible Employees | All | Employees whose salary + dearness allowance is up to Rs.15,000 | | Interest on Investment | Yes, calculated monthly and paid at the end of the FY | No interest is paid on the EPS account | | Maximum Contribution | 12% on salary | Limited to 8.33% on salary up to Rs.15,000, i.e. Rs. 1250 | | Benefit | Lump sum amount upon retirement | Monthly pension after retirement |
How Your Pension is Calculated (EPS)
The formula to calculate the monthly pension under EPS is:
Monthly pension = (Average salary of last 12 months x No. of years worked) / 70
Wage Ceiling and Recent Developments
The EPFO wage ceiling is the maximum level up to which it is mandatory for an employee to join EPF and EPS. As of 2025, the EPF wage ceiling remains Rs 15,000 per month. However, the Supreme Court has recently directed the central government to reconsider this limit, which has been unchanged since 2014. Employee bodies have been advocating for an increase to Rs 21,000. If the wage ceiling is increased, more employees would be eligible to benefit from both EPF and EPS.
Latest Updates
The Employees' Provident Fund Organisation (EPFO) is currently implementing its digital transformation project EPFO 3.0, which aims to improve its operational systems and service offerings. This includes faster access to information, UPI-enabled PF withdrawals, and automated claims processing. Regarding the Employees' Pension Scheme (EPS-95), there has been strong demand from pensioners and trade unions to increase the minimum pension, which currently stands at ₹1,000 per month. While EPFO board meetings have discussed proposals to increase the minimum pension to between ₹1,500 and ₹2,500, no official decision has been made public as of January 26, 2026.
