EPS 2026: Three-year wait for withdrawal benefits, 20-day pension claim timeline among key changes

The Centre has notified the Employees' Pension Scheme (EPS), 2026 under the Code on Social Security, 2020, replacing the 1995 pension framework with an updated legal structure while retaining most of the existing provisions for Employees' Provident Fund Organisation (EPFO) subscribers.

The new scheme aligns the pension framework with the recently notified Employees' Provident Fund (EPF) Scheme, 2026 and introduces several operational changes, including a 36-month waiting period for withdrawal benefits, statutory recognition of the higher pension option and a defined timeline for settlement of pension claims.

Existing EPS subscribers will automatically transition to the new framework without the need for fresh enrolment, ensuring continuity of membership, service records, and accumulated benefits.

Withdrawal benefits to be delayed

One of the changes under EPS, 2026 relates to withdrawal benefits. Under the new framework, eligible members leaving covered employment will generally be able to claim withdrawal benefits only after completing a 36-month waiting period from the last contribution due date or upon attaining the age of superannuation, whichever is earlier.

Under the earlier Employees' Pension Scheme, 1995, eligible members could claim withdrawal benefits soon after exiting employment, subject to prescribed conditions.

The government has introduced the waiting period to encourage long-term participation in the pension system and discourage premature withdrawals, reinforcing the scheme's objective of providing retirement income rather than short-term cash payouts.

The provision is expected to particularly impact employees who frequently switch jobs or leave the organised sector before becoming eligible for a monthly pension.

Existing members to continue automatically

The transition to EPS, 2026 will be seamless for existing subscribers.

Employees already enrolled under the earlier pension scheme will continue as members automatically without submitting fresh applications or completing any new registration process. Existing pension contributions, qualifying service and accumulated benefits will remain intact.

Higher pension option gets legal backing

The new scheme also formally incorporates the higher pension option, providing statutory recognition to a provision that gained prominence following judicial rulings and subsequent implementation by the EPFO.

While the eligibility criteria remain unchanged, its inclusion in the notified scheme provides greater legal clarity for members who have opted for higher pension benefits in accordance with EPFO rules.

Pension claims to be settled within 20 days

EPS, 2026 introduces a defined timeline for processing pension claims. Under the new framework, pension claims must be settled within 20 days. The scheme also provides for accountability and possible interest implications in cases where authorities fail to process claims within the prescribed period.

The move is expected to improve efficiency and reduce delays in pension disbursement, an issue that has often been flagged by retirees.

Other key changes

The scheme also aligns the damages framework with the EPF Scheme, 2026, creating greater consistency across the country's social security regulations.

Importantly, the method of calculating pensionable salary remains unchanged. Pensionable salary will continue to be based on the average monthly wages earned during the last 60 months of eligible service immediately preceding a member's exit from the scheme.

What it means for EPF members

For most EPF subscribers, the notification of EPS, 2026 does not alter the core pension formula or require any additional compliance. Existing members will continue under the revised framework without interruption.

However, the introduction of a three-year waiting period for withdrawal benefits represents a significant policy shift and could affect retirement planning for employees who leave covered employment before qualifying for a monthly pension.

At the same time, statutory recognition of the higher pension option, the mandatory 20-day claim settlement timeline, and closer alignment with the EPF Scheme, 2026 reflect the government's effort to modernise pension administration while preserving the key features of the existing pension system.