Pension: All individuals employed in India are required to maintain Provident Fund (PF) accounts, which are managed by the Employees’ Provident Fund Organization (EPFO). These PF accounts serve as a savings scheme for employees. Each month, 12% of an employee’s salary is contributed to this account, with the employer matching this contribution.
PF account is allocated for pension purposes
A portion of the funds deposited into the employee’s PF account is allocated for pension purposes. According to EPFO regulations, employees who consistently contribute to their PF accounts for over 10 years become eligible for a pension. There are circumstances under which employees may withdraw funds from their PF accounts; however, withdrawing the entire amount will result in the forfeiture of pension benefits.
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EPFO pension rules
To elaborate on the EPFO pension rules, 12% of the employee’s salary is directed to the PF account, with the employer also contributing an equal 12%. Of the employer’s contribution, 8.33% is allocated to the Employee Pension Scheme (EPS) Fund, while the remaining 3.67% is deposited into the PF account. If an employee has contributed to the PF account for 10 years and subsequently leaves their job, they must ensure that their EPS fund remains active to qualify for pension benefits.
If the employee withdraws the total amount from their PF account but keeps the EPS fund intact, they will still be eligible for a pension. Conversely, if the entire EPS fund is withdrawn, pension eligibility will be lost.
Maintaining the EPS fund is essential
Thus, it is crucial to recognize that maintaining the EPS fund is essential for securing pension benefits. As per EPFO guidelines, an employee who has consistently contributed to their PF account for 10 years can claim a pension upon reaching the age of 50, provided they have not withdrawn their EPS fund.