Employees' Pension Scheme

EMPLOYEES’ BENEFIT SCHEMES - PART-2/3

Among various employees’ benefit schemes, Employees Provident Fund, Pension Fund and Deposit Linked Insurance Schemes are recognized as effective tools for making adequate financial provision to the employees in two contingencies Premature Death, while in service and Compulsory Retirement. The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter called the Act), which is umbrella legislation and ensures social security measures for the betterment of employees of the organized sector.

EMPLOYEES’ PENSION SCHEME

Employees’ Pension Scheme, a benefit defined social insurance scheme, formulated on actuarial principles for ensuring long term financial sustenance to the employees of organized sector, was notified by the Central Government on 16.11.1995. It replaced erstwhile Family Pension Scheme, 1971. Though the scheme came into force with immediate effect, but for certain members, it was made applicable retrospectively from 1.4.1993. The erstwhile scheme of 1971 was only in the nature of insurance which offered pension to the widow/widower after death of the member while in service, but the present scheme provides pension to the survivors, old aged and disabled persons.

MEMBERSHIP

All new members joining PF Scheme, 1952 would be members of the present scheme. The existing members of the erstwhile scheme as on 16.11.1995 were compulsorily to be members of Employees’ Pension Scheme, 1995. The existing members of PF Scheme, 1952 (as on 16.11.1995), who did not opt for joining the erstwhile Family Pension Scheme, 1971 and also the beneficiaries of deceased members under erstwhile Family Pension Scheme, 1971, Who happened to die during the period between 1.4.1993 and 15.11.1995 could avail the benefit available under the new Scheme of 1995.

CONTRIBUTIONS

Members need not pay any contribution for joining the pension scheme of 1995. The fund of the scheme is created by partial diversion from PF contribution (corpus) at the rate of 8.33% as against 2.33% under erstwhile Family Pension Scheme, 1971. The Central Government continues to contribute at the rate of 1.16% as before, on overall wage bill of the members as at the end of respective years.

BENEFITS

The Schemes offers the following benefits:

1.    Pension for life to the member : Pension is payable to the members for the life after retirement/superannuation and invalidation.

2.    Pension to the members of family upon death of the member:

·         Pension is payable to widow/widower for life or till remarriage;

·         Pension is also payable to the children/orphans (two at a time) additionally up to 25 years of age, simultaneously with the widow/widower pension;

·         Pension is payable to children/orphans with total and permanent disability irrespective of age and number of such children in the family;

·         Pension is payable to the person(s) nominated by the member, where the member, either is unmarried or has no eligible family member to receive pension; and

·         Where the deceased member has no family member eligible to receive the pension and has not nominated any person to receive the pension, the pension is payable to his /her dependent parent.

3.    The Scheme provides facility for capital return (corpus accretion) on option formula basis.

4.    There is facility to get one-third of the total amount of pension commuted.

5.    Member is also eligible to obtain scheme before attaining the age of 58 years. 

ELIGIBILITY TO RECEIVE BENEFITS

The benefits under the Scheme are available to members on fulfilling the following conditions:

a)    Completion of minimum service of 10 years, and

b)   Attaining the age of 58 years (except under certain contingencies).

Where an employee ceases to be in employment before completion of 58 years of age, he may at his option avail pension. However, this option cannot be exercised before completion of age of 50 years. And such early pension shall be subject to discounting factor. But, no discounting  factor shall be applied where the member pre-deceases or suffers from disability.

Source: Student Company Secretary