The Employes’ Pension Scheme (EPS) is a crucial pension scheme in India, offering financial security to employees after retirement. On June 14, 2024, the government issued a notification introducing significant changes to the rules under the EPS. One of the key updates is the method for calculating the lump sum financial benefit for members who exit the scheme before completing 10 years of service.

New Rules for Withdrawing Lump Sum Amount from EPS

Under the revised rules, changes have been made to ‘Table D,’ which is used to calculate the lump sum withdrawal amount. If an EPS member chooses to exit the pension scheme before completing 10 years of service, the new method will help determine the exact amount they are eligible to receive.

Old vs New Method of Calculation

Previously, if an employee had contributed to the pension scheme for 4 years and 7 months, it would be rounded up to 5 years of service for calculating benefits. However, the new rule calculates the benefit based on the exact number of months of service, ensuring a more precise and fair distribution.

For example, if an employee had completed 55 months of service, the lump sum benefit would be calculated based on these exact months, rather than rounding up to full years.

How is the Lump Sum Benefit Calculated?

The new guidelines now allow the lump sum benefit to be calculated strictly on a monthly basis. This means that the benefit will directly correlate with the exact number of months the employee has been a member of the EPS.

Suppose an EPS member has completed 6 years and 8 months of service, equating to 80 months. If the member's current salary is ₹15,000, the benefit will be calculated using the revised 'Table D' multiplier for 80 months of service, which is 6.78%.

The lump sum benefit would be

₹15,000×6.78=₹1,01,700₹15,000 \times 6.78 = ₹1,01,700

The updated EPS rules provide a more accurate and transparent method for calculating lump sum benefits, offering employees fairer compensation if they exit the scheme early. These changes are expected to enhance the financial planning options for employees, allowing them to make more informed decisions about their retirement savings.

If you need more details or examples, feel free to ask!