Retirement planning in india often revolves around two key schemes under the Employees’ Provident Fund Organisation (EPFO):
✅ EPF (Employees’ Provident Fund) – a lump‑sum savings with interest
✅ EPS (Employees’ Pension Scheme) – a monthly pension for life
Here’s everything you need to know about how much pension you’ll get and how it’s calculated ⬇️
1. EPF vs EPS: Understanding the Difference
- EPF builds a corpus over your working life. You (12% of salary) + employer (12%) contribute monthly, and interest is added yearly. You can withdraw this at retirement.
- EPS is designed for monthly pension income after retirement, not a lump sum. A part of your employer’s contribution (8.33%) goes into EPS.
2. Who Gets EPS Pension? Eligibility Rules
To receive a pension under EPS:
✔️ You must be an EPFO member who has contributed continuously
✔️ You must have completed at least 10 years of service
✔️ You should be 58 years or older (early pension is possible from age 50 with reduction, or increases if you delay till 60).
3. The EPS Pension Formula (Simple & Fixed)
Your monthly EPS pension is calculated as:
Pension = (Pensionable Salary × Pensionable Service) ÷ 70
Where:
📌 Pensionable Salary = average of your last 60 months’ basic pay + DA (capped at ₹15,000/month normally)
📌 Pensionable Service = total years of contributions (rounded per rules)
4. What This Formula Means in Real Numbers
Here are some quick ballpark figures based on common salaries and service years:
Service Years
Pensionable Salary ₹10,000
₹12,000
₹15,000 (max cap)
10 yrs
₹1,428/month
₹1,714
₹2,142
20 yrs
₹2,857
₹3,428
₹4,285
30 yrs
₹4,285
₹5,142
₹6,428
👉 With the wage ceiling at ₹15,000 and 35 years of service, you could reach around ₹7,500/month under standard EPS rules.
5. Maximum & Minimum Pension Limits
- Maximum Monthly Pension in normal EPS is roughly ₹7,500–₹8,000 with full service and max wage cap.
- Minimum Pension currently guaranteed around ₹1,000/month for eligible members, though there’s no confirmed hike yet as of late 2025.
6. What Happens If You Retire Early or Late
- Early Pension (50–57 yrs): Pension reduces by ~4% for each year you take it before 58.
- Delayed Pension (59–60 yrs): Pension increases by ~4% for each year after 58.
This means your actual monthly amount can vary significantly based on when you start taking EPS benefits.
7. Optional Higher Pension Contribution
A Supreme Court‑mandated option allows some employees to opt for higher EPS contributions based on their actual salary (not just the ₹15,000 cap), which can significantly raise monthly pension — but it requires extra contributions from both you and your employer.
A recent court judgment reinforced that once EPFO accepts such higher contributions, the pension can’t be denied.
8. EPF Lump Sum vs EPS Monthly Pension
- EPF gives you a one‑time lump sum (balance + interest). It’s great for major goals or emergencies.
- EPS gives you steady monthly income to cover your living costs in retirement.
Most financial planners suggest treating EPF + EPS together for a balanced retirement income plan.
Quick Takeaway
✔️ EPF builds long‑term savings you can withdraw at retirement.
✔️ EPS provides monthly pension based on simple statutory math.
✔️ Pension depends on your last 5‑year average salary and years of service — typically ₹4,000–₹7,500/month for many workers.
✔️ Longer service and optional higher contribution choices can lift your monthly payout.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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