“What is EPS?”, “What is EPF?” – Difference between EPF and EPS

The difference between Employee Provident Fund (EPF) and EPS is often misunderstood. Although both are government-sponsored pension plans designed to help salaried employees in saving for retirement. There are minor differences between these terms that are explained in this article. Before going through the Difference between EPF and EPS it is essential to know “What is EPS?”, and “What is EPF?”

Introduction

The Employees Provident Fund & Miscellaneous Provisions Act, 1952, establishes the Employees Provident Fund (EPF) and Employee Pension Scheme (EPS). The plans are overseen by a central board of trustees made up of members from the federal and state governments, as well as companies employers and employees.

What is EPS (Employee Pension Scheme)?

Employees who are EPFO members and have contributed to the EPS account are eligible for a pension under the pension scheme. When an employee dies, the pension continues to be paid to the nominee. The EPS account is not funded by employees. The employer contributes 8.33 percent of the employee’s pay (basic plus dearness allowance). The employee receives a pension from such a scheme when he or she reaches the age of 58. This scheme allows for a maximum contribution of INR 1,250. Employees are not required to contribute to this plan.

What is EPF (Employee Provident Fund)?

Employee Provident Fund (EPF) is a retirement savings plan in which both the employer and the employee contribute 12% of the fund’s basic and dearness allowance (DA). It represents a total contribution of 24%. Before you retire, you can withdraw a portion of the money you have put aside. The total amount you can take out after you retire.

When you sign up for this program, you will be given a UAN (Universal Account Number), which you will keep until the conclusion of your career. When you change jobs, your UAN will remain as it is and it will remain with you.

Advantages of EPF (Employee Provident Fund)

1. Over time, it can help you save a significant amount of money.

2. Aids in the funding of retirement and post-retirement lifestyles.

3. There is no need to make a one-time investment. A monthly deduction from your salary can help you save numerous money in the long run.

4. Tax advantages are available for both the amount contributed and the tax generated.

5. In the event of a financial emergency, the EPF amount serves as a financial safety net.

Know more: EPF Interest Rate 2021-22

Difference between EPF and EPS

Frequently Asked Questions (FAQs)

1. Is transferring EPF or EPS accounts possible?

The Employees Provident Fund Organisation (EPFO) assigns each plan participant a Universal Account Number (UAN). The UAN remains the same during the member’s employment, and all other pertinent information can be accessed using the same UAN. If an employee moves jobs, the UAN remains the same, and the person can continue to contribute to the EPF account. However, in such a situation, he or she must change the UAN number to the new employer. To transfer funds online, a person must first activate their UAN and link their Aadhaar and PAN to it.

2. What are the advantages of EPS?

The following are the key advantages of contributing to EPS:

1. There are pension advantages available.

2. EPFO members are entitled to a lifetime pension. In the event that a member dies, his or her family is entitled to a pension.

3. If an employee has been unemployed for two months or more, they are entitled to a full pension withdrawal.

3. Who is eligible to be a nominee for an EPS account?

Any Family number can be a nominee for an EPS (Employee Pension Scheme) Account.

4. What is the tax benefit of an EPF contribution?

The amount invested, the interest earned, and the amount redeemed are all tax-free.

Conclusion

To summarise the difference between EPF and EPS, EPF (Employee Provident Fund) is a retirement savings plan in which both the company and the employee pay a portion of the latter’s salary. EPS (Employee Pension Scheme), on the other hand, is funded solely by the employer.