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The Employee Pension Scheme (EPS) and National Pension Scheme (NPS) are two common saving schemes. Both are geared to provide you with steady income through retirement. EPS is a benefit extended to EPF account holders while NPS is a voluntary scheme you can opt for. 


What is the difference between EPS and NPS and which is better? Get the answer below. 

What is the Employee Pension Scheme?

The Employee Pension Scheme (EPS) provides you with a regular allowance once you reach the age of 58. You are eligible for EPS only if you are an EPF (Employees’ Provident Fund) member. You can opt out of EPS only at the start of your employment. 


In the case of EPS, your employer contributes 8.33% of your salary and dearness allowance combined to a fund. Once you retire, you receive regular income from your EPS account.

What is the National Pension Scheme

National Pension Scheme (NPS) is a voluntary retirement benefit scheme that is open to you as a citizen of India. Here, you make regular contributions to a pension fund of your choice, which is overseen by a fund manager. 


Your pension accumulates through your working years. When exiting the NPS, you can withdraw a lump sum, and use the rest to purchase an annuity that would give you regular income through retirement. 


Some examples of NPS funds are:


  • SBI Pension Funds Private Limited

  • LIC Pension Fund – Scheme Tax Saver – TIER II

  • UTI Retirement Solutions Limited

Which Authority Governs EPS and NPS?

The Employees' Pension Scheme, 1995, is an undertaking of the Central Government. It comes under the purview of the Employees’ Provident Fund Organisation, India (EPFO).


The National Pension Scheme is an undertaking of the Central Government and the Pension Fund Regulatory and Development Authority (PFRDA).


The EPS and NPS difference is negligible here, as both schemes are initiatives of the Central Government and are therefore credible social security options.

Which Sector of the Workforce Benefits from EPS and NPS?

EPS can benefit you if you are an employee in the organised sector. Further, EPS is only applicable to you if you are a member of the EPFO. This means that EPF must be applicable to your company. 


NPS is available to a wider workforce, and this is a major factor in the EPS vs NPS debate. You cannot sign up for NPS if you belong to the armed forces. However, you can invest in NPS if you work in the public, private, or unorganised sectors.

Does EPS or NPS Have Simpler Eligibility Criteria?

When considering EPS vs NPS, remember that NPS has more relaxed eligibility criteria and is available to a wider section of Indian citizens. 

To benefit from EPS, the eligibility terms are as follows:

  • You must have an EPF account

  • Your salary + dearness allowance must not exceed ₹15,000 (applies to EPS accounts opened after 1 September 2014)

  • You must complete 10 years of service, continuously or non-continuously, to get a pension

  • You must attain 58 years of age to start receiving the pension (Note: You can obtain a reduced pension at a lower rate from age 50 onwards. You can also secure a higher pension by waiting until age 60 to receive payments.)

To benefit from NPS, the eligibility criteria are as follows:

  • You must be a resident Indian citizen, a Non-Resident Indian (NRI), or an Overseas Citizen of India (OCI) 

  • You must be between the age of 18–60 (NPS can be extended until age 75)

  • You must fulfil the necessary KYC requirements

Does NPS or EPS Provide More Income During Retirement?

The financial support you get is perhaps the most important difference between EPS and NPS. Read on to know more. 

1. NPS

NPS provides a larger pension, generally speaking. NPS is a market-linked product and does not offer returns at a fixed, guaranteed rate. 


However, because it invests in government debt, corporate debentures and shares, you can look forward to an attractive rate of return. 


You can decide upon your fund manager and how much exposure to equity you are comfortable with. Depending on the scheme and fund you choose, you earn returns. For instance, the 10-year returns as of February 2023 are in the range of 8–12.6%.


For illustration purposes, say you are 30 years of age, and contribute ₹2,000 per month to your NPS account. Further you:


  • Expect to contribute till age 60

  • Desire a return at 11%

  • Would like to use 50% of your maturity amount to purchase an annuity

  • Expect an annuity rate of 6% 

In such a case, you may receive a lump sum value of ₹28,30,228 and a monthly pension of ₹14,151. 


Note: The above numbers are indicative due to market risks involved.

2. EPS

When it comes to EPS, the calculations are more straightforward.


You get a superannuation pension for:


  • completing 10 or more years of service and attaining age 58 

  • an early pension for completing 10 or more years of service and retiring

  • ceasing to be in employment before age 58

Your pension is calculated as,


Monthly pension = (Pensionable salary * pensionable service)/ 70


Now, your pensionable salary is the average of your basic salary for the last 5 years. It is capped at ₹15,000 even if your basic salary has risen in value. 


So, like in the last example, assume that you have 30 years of pensionable service. Then, your monthly pension would amount to (15,000*30)/70 = ₹6428.57. 


The amount is lower, but it is not possible to tell the exact EPS and NPS difference because NPS does not offer fixed returns. Remember, the minimum that you earn under EPS is ₹1,000.

Does NPS or EPS Offer Better Tax Benefits?

There is a big difference between EPS and NPS in terms of withdrawal rules.


With EPS, if you do not complete 10 years of service, you can withdraw your EPS funds using form 10C. The amount you get depends upon the years worked. You get your last drawn pay multiplied by a factor that is higher for a greater number of years worked. 


If you complete 10 years of service, you get a superannuation pension from age 58, but you can request for an early pension from age 50 at a reduced rate.


The rules for NPS withdrawals are more nuanced. They differ depending on your employment status and the specifics of your NPS plan. You can exit from NPS after completing 5 years of the scheme by investing at least 80% in an annuity and taking back the rest as a lump sum. 


However, if the total accumulated is less than ₹2.5 Lakhs you can take back the entire amount as a lump sum. You can make partial withdrawals for reasons like marriage of children after 3 years of being in NPS. This amount should not exceed 25% of your contributions. 


You can make three partial withdrawals during your NPS tenure.

What Are Some Unique Features of NPS and EPS?

A key difference between EPS and NPS are their special features.

EPS offers features such as:

  • Pension on disablement/ death

  • Widow pension

  • Children's pension

  • Orphan pension

NPS offers special features such as:

  • Flexible investment options

  • Voluntary, withdrawable Tier-II account

  • Easy portability across jobs






Offered with EPF



EPF members with 10 years’ service and salary + dearness allowance at joining of ₹15,000 or less

Indian citizens between age 18 and 75

Maximum contribution

8.33% * ₹15,000 = ₹1,250

No limit

Premature withdrawal




Stable, and contributions don’t earn interest



EPS amount is taxable

Offers deductions up to ₹2 Lakhs, income from annuity taxable, lump sum and purchase of annuity exempt

In conclusion, EPS and NPS are two salient social security schemes backed by the Central Government. You may or may not be eligible for EPS, but NPS is something you can always subscribe to. 


EPS provides stable income, while NPS promises higher returns powered by marked-linked assets. In the end, retirement planning may mean a combination of EPS, NPS, and other assets you can find on Bajaj Markets. 


Options such as fixed deposits and mutual funds can help provide you with a steady flow of income. You can also plan them such as to access lump sum amounts for your life goals.

FAQs on EPS vs NPS

NPS offers market-linked returns that are potentially higher than EPS pension amounts. However, there is risk associated with NPS and the pension amount is not guaranteed.

Yes, if you are eligible for EPS, you can voluntarily subscribe to NPS as well.

Yes, you can opt out of EPS at the start of your employment. You can exit NPS after 5 years.

NPS is portable across jobs. With EPS you must make sure you complete 10 years under an EPFO-covered company.

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