Employees’ Pension Scheme, 2026: Key Changes in Pension Benefits, Family Pension, Withdrawal Benefits and Employer Compliance

On 29 June 2026, the Ministry of Labour and Employment notified the Employees’ Pension Scheme, 2026 (EPS 2026) under Section 15(1)(b) of the Social Security Code, 2020 (Social Security Code). The Scheme consolidates and modernises the statutory pension framework under Chapter III of the Code on Social Security while preserving the contributory pension structure administered through the Employees’ Provident Fund Organization (EPFO).

The Scheme came into force from 29 June 2026.

Key Highlights:

1. The Scheme replaces the Employees’ Pension Scheme 1995 (EPS 1995) and the Employees’ Family Pension Scheme, 1971. Nonetheless, all pensions that have been sanctioned and rights that have been accrued through the previous schemes continue to be governed and protected under the new scheme, ensuring continuity of social security benefits.

2. The Scheme applies to:

   • employees who become members of the Employees’ Provident Fund Scheme, 2026 and satisfy the eligibility conditions, including the notified wage ceiling applicable for new membership, and

   • existing members of EPS, 1995 and the Employees’ Family Pension Scheme, 1971.

3. Membership continues until attainment of superannuation age, death of a member, receipt of withdrawal of benefits, or commencement of pension, whichever occurs earlier.

4. The existing Employees’ Pension Fund of EPS 1995 becomes the Pension Fund under EPS 2026. All assets, liabilities, and balances get transferred to the new Scheme without affecting pension disbursal.

5. The employer’s share remains unchanged at 8.33% of the wages till the notified wage ceiling. The share of the Central Government also remains the same at 1.16% of the wages, subject to certain statutory ceilings.

6. For members who have exercised the joint option under the earlier Employees’ Pension Scheme, 1995, the employer continues to contribute an additional 1.16% on wages exceeding Rs 15,000, making the effective pension contribution 9.49% on such wages, subject to the conditions governing higher pension already applicable under the earlier Scheme.

7. The Scheme formally defines service classification:

   1. Contributory service – Service in respect of which contributions have been paid or would be payable.

   2. Eligible service — Contributory service determined in accordance with the Scheme, including prescribed rounding-off rules for pension eligibility.

   3. Pensionable service — Service recognised for pension computation on the basis of contributions received or receivable in the Pension Fund.

   For existing members,service rendered prior to 16 November 1995) continue to be included for determination of pension entitlement.

8. Members who have completed 20 or more years of pensionable service will continue to receive a two extra years of weightage, increasing the final pensionable service used for computation.

9. The pensionable wages are calculated by taking the average of the wages earned during the last 60 months prior to exit, based on the wage ceiling applicable during the respective periods.

Where full wages have not been drawn throughout the relevant 60‑month period, pensionable wages will be computed in accordance with the averaging methodology prescribed under the Scheme.

10. Monthly pension continues to be computed as:

    [Pension = (Pensionable Wages × Pensionable Service) ÷ 70]

    When different wage ceilings have operated during the period of employment, the pension will be computed proportionally for each of the periods during which the wage ceiling has been in operation.

11. The Scheme provides structured pension benefits depending on the cause and timing of exit:

    • Superannuation Pension – Payable to members completing at least 10 years of eligible service upon attaining the age of superannuation.

    • Early Pension – Payable on 10 years of service if retirement is done before superannuation, but not prior to 50 years, with a deduction of 4% per annum in case of early drawal.

    • Disablement Pension — Payable on permanent and total disablement during service, even if minimum qualifying service is not completed, provided at least one month’s contribution exists.

    • Widow/Widower Pension — Payable to the surviving spouse from the date of death of the member, continuing until death or remarriage.

    • Children’s Pension — Payable in addition to widow/widower pension, limited to two children at a time, up to 25 years of age, with lifelong entitlement for permanently disabled children.

    • Orphan Pension — Payable where no surviving spouse exists, at a higher rate than children’s pension, subject to maximum two eligible orphans.

    • Nominee Pension — Payable where no eligible family exists and a valid nomination is made; otherwise, benefits pass to dependent parents.

    • Dependent Parents’ Pension — Payable to dependent father or mother where no spouse, children or nominee exists.

12. Members are allowed to defer pension beyond superannuation until 60 years of age, whereby the pension is increased by 4% per completed year of deferment. This encourages delayed retirement and enhances lifetime pension benefits.

13. The Scheme provides for early exit and withdrawal framework, according to which, employees exiting before completion of 10 years of eligible service may:

    • opt for withdrawal benefit under revised tables; or

    • obtain a Scheme Certificate enabling continuity of pensionable service upon future re-employment covered under the Scheme.

    Withdrawal a member leaves employment before becoming eligible for pension and does not join another covered establishment, withdrawal benefits become payable after expiry of 36-month waiting period, from the date the last contribution became due or superannuation, whichever occurs earlier.

14. Where a member becomes permanently and totally disabled during service, he/she will be entitled to a pension even though the member has not completed the prescribed period of pensionable service, provided at least one month’s contribution has been received in the Pension Fund.

The pension will be payable from the date immediately following the date of disablement till his/her death. Medical examination may be required for determining permanent and total disablement.

15. The Scheme continues the minimum pension of Rs 1,000 per month, after permissible deductions such as early retirement pension and prior commutation benefits as applicable under the existing Scheme.

16. The Scheme expands family protection by ensuring structured priority among beneficiaries:

    • spouse first;

    • children (including disabled children with lifelong benefit);

    • orphans in specified cases;

    • nominees in absence of eligible family member; and

    • dependent parents as residual beneficiaries.

It also regulates cases of multiple widows, remarriage, and orphan succession.

17. A member or beneficiary cannot be denied pension merely because the employer failed to deposit contributions.

18. The scheme provides for time bound claim settlement, according to which, all pension claims must be settled within 20 days of receipt of complete application. Delay without sufficient cause attracts 12% annual interest, recoverable from the concerned officer.

19. Employers are required to:

    • file electronic monthly returns

    • maintain digital wage and service records

    • ensure timely deposit of contributions

    • facilitate inspections

    • comply with Central Board directions for implementation

    • furnish ownership and establishment particulars to the Commissioner wherever required

    • submit employee, wage and establishment particulars to the Commissioner within the prescribed timelines

20. The Scheme maintains structured governance for the Pension Fund, such as:

    • annual actuarial valuation of fund ;

    • audit by competent authorities;

    • consolidated accounts maintenance; and

    • investment of Pension Fund in accordance with the investment pattern prescribed under the EPF Scheme, 2026.

21. Exemption may be granted where establishments provide pension schemes offering benefits equal to or better than EPS 2026, subject to approval under the Code.

The Scheme also provides for transfer of value and migration of pension accumulations in cases of exemption, transfer between exempted establishments and statutory pension funds, subject to prescribed conditions.

22. International Workers are covered through:

    • totalisation of service under bilateral social security agreements;

    • inclusion of foreign service for eligibility;

    • withdrawal and pension benefit computation as per agreements; and

    • cross-border disbursement of pension.

23. In case where there are charges of murder or abetment of murder against the claimant of family pension, the payment of pension is withheld until the completion of criminal proceedings, and if he/she is convicted, then the pension is forfeited and paid to other eligible family members.

The EPS 2026 largely continues the existing contributory pension framework while aligning it with the Social Security Code. The Scheme preserves accrued rights under the earlier pension schemes, introduces clearer benefit provisions, strengthens family pension entitlements, improves digital administration, prescribes time-bound claim settlement, enhances protection against employer default, and streamlines governance of the Pension Fund without altering the core structure of the Employees’ Pension Scheme.

Also Read: EPFO Clarification on PAN Linking to Establishment Profile & Manual Verification for Name Mismatch