EPF savings: Why ignoring EPS records can cost you your retirement income

Employees' Provident Fund (EPF) contributions form a key part of retirement savings for salaried individuals, combining employee and employer contributions each month along with annual interest. Alongside the EPF account, a portion of the employer's contribution is also directed towards the Employees' Pension Scheme (EPS), which is meant to provide monthly pension benefits after retirement.

Most employees contribute 12% of their basic salary plus dearness allowance (subject to a maximum of
₹15,000) every month towards EPF. The employer also contributes an equivalent 12%, of which 3.67% is deposited into the EPF account, while the remaining 8.33% is invested into the employee's EPS account.

While EPF balances are regularly tracked by employees, EPS records often receive less attention. These records include service history, contribution details and eligibility data, which are used to determine pension benefits. Errors or gaps in EPS records can impact the calculation or processing of retirement benefits at a later stage. Hence, it is crucial to understand how the process works and what you can do to fix issues if they arise.

Why monitoring your EPS is important?

From a statutory social security perspective, EPS is a defined-benefit framework that provides a lifelong monthly pension, making it one of the few assured income streams available to private sector employees post-retirement.

“The pension is calculated using a prescribed formula based on pensionable salary and years of contributory service, which means that even minor inaccuracies in service records or salary reporting can lead to a permanent and irreversible impact on pension outcomes,” according to Vivek Daswaney, Partner at Economic Laws Practice.

Importantly, EPS records are entirely dependent on employer filings, with limited visibility or control at the employee level. As a result, discrepancies can go unnoticed for years and only surface at the time of retirement, when rectification becomes difficult. Hence, it is crucial for an individual to monitor their EPFO passbook regularly, which in turn helps in identifying and correcting errors early, before they adversely impact retirement income.

For instance, a minimum of 10 years of contributory service is mandatory to qualify for a monthly pension. Failing this, the member is only entitled to a withdrawal benefit and not a recurring pension. “Accordingly, gaps in contributions, whether due to incorrect employer filings, missing months, or failure to transfer service across employments can result in an employee falling short of this threshold, thereby extinguishing pension eligibility entirely,” he explained, adding that even where the threshold is met, the pension quantum is directly linked to the total recognised service, meaning each year of lost or unrecorded service proportionately reduces the pension.

What to do if EPS details are incorrect?

Most EPS data changes from the employee's side can only be accomplished through an EPS correction request from the employer, said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited. The employee is required to provide the necessary documents to the employer, such as their KYC details, salary slips, and appointment letters.

Depending on the situation, if the EPS employer is unhelpful or even unresponsive, then the employee can take the following steps:

— Reach out to authorities: An employee may file a grievance directly with the EPFO through the EPFiGMS portal or visit the EPFO in person.

— Submit a joint declaration form: The employee can also submit a joint declaration form, in addition to providing documentation to support their claim to request this change.

— Pursue legal action: For more extensive cases, the employee can choose to escalate the situation to the EPFO commissioner or pursue legal action.

"The employee should keep a thorough record of their employment history in order to substantiate their request,” Maurya said.

Frequent mistakes that employers can make

An employee may come across errors in EPS details, including wage reporting. This typically occurs when EPS contribution wages are reported beyond the statutory wage ceiling of ₹15,000, Maurya said, adding that in some cases, the full salary is reported instead of applying the prescribed cap, or the cap is disregarded while calculating the reporting contributions.

He also noted that another common mistake is the mismatch in some of the employee's personal information, such as the name, date of birth or workforce entry, which can create quite a bit of confusion when the employee goes to claim their pension.

Some other common mistakes include missing or delayed EPS contributions, incorrect association of the Universal Account Number (UAN), and the non-updated exit date, Maurya said. “More in the form of a direct relationship, those companies that have employees leaving completely fail to recognise the transfer of EPS service as a fragmented history of their service.”