EPF vs EPS: What you must know before retirement

EPF is a government-backed savings scheme for salaried employees in organisations covered by the Employees’ Provident Fund Organisation. It involves both employee and employer contributions of 12% of salary (basic + dearness allowance), with the employer’s share partly diverted to EPS.

EPS is a pension plan aimed at delivering steady income in retirement, available only to EPF-members with at least 10 years of service. Unlike EPF, only the employer contributes to EPS (8.33% of salary), not the employee.

EPF currently offers an interest rate of around 8.25% (FY 2024-25) and contributions are tax-deductible under Section 80C. The interest is tax-free up to certain limits, and withdrawals are tax-free only under specific conditions.

Under EPS, the pension begins at age 58 after 10 or more years of service. If the employee dies, the pension continues to the nominee, offering long-term income protection.

EPF is for long-term disciplined saving with compound growth and tax perks. EPS adds a defined income layer in retirement, but has limited flexibility and depends on employer contribution. You can choose which is better depending on your retirement goals. (Text: ET Wealth edition Oct 20 - Oct 26).