If you work in the private sector, your PF is deducted every month. PF is divided into two parts — one part goes to your provident fund, and the other part goes to your pension. Both these parts come from the employee’s and employer’s contributions.
As per the rules, 12% of the employee’s basic salary is deducted as PF. The company also contributes the same amount to the employee’s PF account. However, the company’s share is divided into two parts. The first part, about 3.67%, goes to the EPF account. The second part goes to the EPS, i.e. Employee Pension Scheme. The employee gets the benefit of both these schemes. Let’s understand what benefits each one provides.
What Are EPF and EPS?
EPF and EPS are two savings plans made for salaried people. They help in planning for retirement. EPF helps employees save money for the future, while EPS gives a monthly pension after retirement.
EPF is for people working in companies registered under the Employees’ Provident Fund Organization (EPFO). If a company has more than 20 employees, it must give this scheme. Both the employee and employer give 12% of the salary (basic pay + dearness allowance). From the employer’s part, 3.67% goes to EPF and 8.33% goes to EPS. The EPF interest rate for 2024–25 is 8.25%.
EPS gives a pension after at least 10 years of PF deductions. The pension starts at the age of 58. The employer puts 8.33% of the salary into EPS. After the employee’s death, the pension goes to the nominee. Together, EPF and EPS give both savings and income after retirement.
Difference Between EPF and EPS
| Feature | EPF | EPS |
|---|---|---|
| Goal | To build a fund for retirement | To give a monthly pension after retirement |
| Who can join | Employees in EPFO-registered companies (with 20 or more workers) | Only those who have EPF |
| Contribution | 12% of salary + dearness allowance | Employer gives 8.33% of salary |
| Interest | Yes, decided every year | No interest |
| Withdrawal | Can take up to 100% of the amount (25% must be kept till job ends) | Pension starts at 58 years after 10 years of service; continues for nominee after death |