EPF vs EPS: When we talk about future financial security, EPF (Employees’ Provident Fund) and EPS (Employees’ Pension Scheme) are two very important schemes. Both are government schemes that gradually accumulate money during your employment, providing financial support at the time of retirement.
Although both these schemes fall under the same law, the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, their objectives and working methods differ. Let’s understand in simple terms the differences between the two schemes and which one is more beneficial for you.
What is EPF?
Employee Provident Fund (EPF) is a fund where a portion of your salary is deposited every month. This amount is 12% of your salary (basic salary + dearness allowance), contributed by both you and your employer.
Of the employer’s 12% contribution, a portion, i.e., 3.67%, goes to the EPF, and the remaining goes to the EPS (pension scheme). EPF is a long-term savings fund on which the government provides a fixed interest rate each year. Currently, this interest rate is 8.25% (2024-25), which is tax-free, but subject to certain conditions. You can withdraw funds from EPF after changing or leaving your job, but there are certain rules.
What is EPS?
The Employee Pension Scheme (EPS) is a scheme designed to provide a monthly pension after retirement. The key feature is that only the employer contributes, not the employee. The employer deposits 8.33% of your salary into the EPS fund. You become eligible for a pension after you have served at least 10 years and reach the age of 58. If the employee dies, their nominee continues to receive the pension. This means this scheme provides security not only for you but also for your family.
Which plan is better for whom?
If you want a large lump sum upon retirement, EPF is a better option. However, if you want a steady monthly income after retirement, EPS will provide relief. Together, both schemes strengthen your retirement security. Therefore, it’s important to stay informed about them and continue making regular contributions while you’re employed.
