Your pension could be stuck in limbo. Here’s how to prevent it

That’s exactly what happened to Mr. A, who worked for three companies, each handling PF differently. When he finally decided to withdraw his savings, he hit an unexpected roadblock—his pension contributions under the Employees’ Pension Scheme (EPS) had never been merged. Without this step, his withdrawal request was denied. 

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His case is a stark reminder that missing a step in the EPS transfer process can cause delays, confusion, and even financial loss. Unlike PF, which is actively transferred or withdrawn, EPS is often overlooked—until it’s too late.

Here’s why missing this crucial step can cost you and how to avoid it.

How EPS contributions work

Employers contribute 12% of an employee’s basic salary to the provident fund system. Of this, 8.33% is allocated to EPS, while 3.67% goes to the Employee Provident Fund (EPF). Regardless of whether an employer is exempt (managing PF through a private trust) or non-exempt (managed directly by the EPFO), all pension contributions flow to the Employees’ Provident Fund Organisation (EPFO).

In Mr. A’s case, his first two employers were exempt, meaning they handled their employees’ PF through private trusts, while only the EPS portion went to EPFO. His third employer, however, was non-exempt, meaning both his PF and EPS were directly managed by EPFO. This difference in fund management turned out to be a crucial factor when he attempted to withdraw his funds.

The hidden EPS transfer rule

After leaving his third employer to become a freelancer, Mr. A had accumulated less than 10 years of total service. He withdrew his PF from his first two employers but encountered issues with the third. 

Despite completing the mandatory 60-month waiting period for full withdrawal, he was informed that his EPS accounts from previous employers needed to be merged first. Unbeknownst to him, his earlier pension contributions were still lying with EPFO, unlinked to his latest account.

“Though the online claim facility at present allows a member to apply for settlement from the latest member ID linked with their UAN (Universal Account Number), the concerned field office is likely to reject the claim if the same UAN is linked with any other member ID for a previous period and not transferred,” said Adarsh Vir Singh, founder of Nidhi Niyojan and a veteran in provident fund matters.

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To resolve the issue, Mr. A must transfer his EPS service from his first employer to the second, and then to the third, before becoming eligible for withdrawal. “He needs to fill out Form 13, and once the three services are merged in the latest account, he can apply for the refund since his service period is less than 10 years,” said Vishwanath B.G., associate director at Mercer Wealth India.

What happens if you cross the 10-year mark?

The moment an employee completes more than 10 years of EPS service, the option to withdraw pension contributions disappears. Instead, the employee must apply for a pension scheme certificate, which serves as proof of their accumulated pensionable years.

“Any employee, irrespective of age, who has put in more than 10 years of EPS contributory service can apply for a scheme certificate, provided they have withdrawn the PF. This is suitable for employees planning a sabbatical with the intention of rejoining employment, as it helps include those years in total pensionable service at retirement,” Singh explained.

In Mr. A’s case, had his first two employers not linked his PF member IDs to his UAN, his third employer would have released both his PF and pension funds. While this might seem like a smooth exit, it could have led to a dead-end: without an active EPF account, he wouldn’t have been able to withdraw his EPS funds. “You need an active EPF account to withdraw the EPS amount,” Mercer Wealth’s Vishwanath noted.

A scheme certificate can provide a solution in such cases. Mr. A can request one from his first two employers by submitting Form 10C. “An employee with less than 10 years of EPS contributory service who has withdrawn PF can apply for a scheme certificate to avail pension benefits at age 58 or reduced pension at age 50,” Singh said.

Employees also have the option to apply for a scheme certificate when settling their PF. “EPFO issues scheme certificate in the physical form,” said Vishwanath.

However, submitting the certificate to activate pension benefits isn’t always straightforward. 

“There is no defined process for submission,” Vishwanath said. “I have seen instances where members go to their nearest PF office, but the officer may ask them to visit the one that issued the scheme certificate.” Singh emphasized that the certificate can be used at any regional PF office, regardless of the issuing region.

For pre-UAN cases without KYC details, obtaining a scheme certificate itself can be a challenge—one that employees should proactively address to avoid complications later.

The best approach for a smooth EPS, EPF transition

To avoid complications down the line, always transfer your EPF and EPS service when switching jobs, regardless of whether the employer is exempt or non-exempt.

“With every job change, employees should submit an online PF/EPS transfer application using Form 13 to maintain continuity of service. Those who frequently change jobs without transferring past accumulations should apply for a merger with their last employer using Form 13 to ensure EPS service eligibility is updated in EPFO records,” advised Singh of Nidhi Niyojan.

For employees who leave full-time jobs to become self-employed, there are two options:

• Withdraw EPF and obtain a scheme certificate for EPS
• Keep the EPF account active

“In the second scenario, the EPF balance will continue earning interest until age 58. However, interest earned after three years of no employment becomes taxable. You can fill out Form 10D at age 58 to start receiving the pension,” Singh explained.

For those who withdraw EPF and obtain a scheme certificate, additional steps are required. At age 58, they must visit a PF office to submit the certificate to initiate pension benefits. If they rejoin full-time employment before turning 58, they can surrender the scheme certificate to their employer to merge past contributions. 

“Our recommendation for the employee is to retain original scheme certificate and surrender only when s(he) attains 58 years of age that too directly to PF office along with Form10D, which enables him to claim pension,” said Singh.

The 2014 rule change

A critical regulatory shift on 1 September 2014, reshaped EPS eligibility. Employees who joined the workforce after this date and had a basic salary above ₹15,000 per month do not contribute to EPS. The previous 8.33%-3.67% split no longer applies, instead the full 12% employer contribution goes to EPF.

However, employees who were already contributing to EPS before this cutoff must continue, regardless of any salary increase. If an employer mistakenly classifies an eligible employee as ineligible for EPS, it can lead to blocked fund transfers or withdrawal issues.

“You will need to rectify the issue and have the employer deposit the missed EPS contributions to claim your funds. Interest on these contributions may not be paid,” Vishwanath said.

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Employees should link their Universal Account Number (UAN) with Aadhaar, complete KYC details, and regularly check their passbooks to track EPS contributions. Staying proactive about EPS-related compliance ensures smooth fund transfers and withdrawals, safeguarding long-term pension benefits.