Can you withdraw the pension share from your EPF?
If you're an employee contributing to the provident fund, your employer might be allocating a portion of it each month to the employee pension scheme (EPS). Many employees often wonder how this scheme works and whether they can access this portion before reaching the retirement age.
It's essential to understand the distinction between EPS and the Employee Provident Fund (EPF). An employer typically deducts 12% of your basic salary plus dearness allowance, if any, from your monthly salary to contribute to the EPF account. This salary may also include any retaining allowance and the cash value of food concessions, if applicable.
Your employer is required to chip in an equal percentage amount. However, from the employer’s 12% contribution, 8.33% is allocated to the EPS. Importantly, even if your basic pay exceeds ₹15,000, the maximum pension contribution will be capped at 8.33% of ₹15,000 which amounts to ₹1,250. This ₹15,000 pensionable salary is subject to future revisions.
For example, if your monthly pay is ₹15,000, you and your employer would each contribute ₹1,800 each month to the EPF, totalling ₹3,600. Since your basic pay is at the ₹15,000 limit, 8.33% ( ₹1,250) from the employer’s contribution will go toward the EPS. The remaining 3.67% from the employer’s contribution will be allocated to the EPF, which earns a fixed interest rate of around 8%, determined annually. Meanwhile, the entire employee contribution goes directly into the EPF.
After an amendment on 1 September 2014, new member employees earning a basic pay of more than ₹15,000 per month cannot be a part of the pension scheme. If that’s the case, the entire employer’s contribution will go towards the EPF. If you enrolled with EPF before September 2014,
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