The Employees’ Pension Scheme (EPS‑95) run by the EPFO provides a monthly pension to employees in the organised sector when they retire, provided they meet certain conditions. The pension amount depends on your salary, years of service, and government rules.
📌 Who Is Eligible for EPFO Pension?
To receive a pension from the EPFO under the EPS:
- You must be a member of the Employees’ Pension Scheme.
- You must have completed at least 10 years of service with regular EPS contributions.
- Pension payments normally start after you reach 58 years of age.
Early pension is possible from age 50, but your pension amount is reduced for each early year.
🧮 How the Pension Is Calculated
The EPS pension is calculated using this formula:
Monthly Pension = (Pensionable Salary × Pensionable Service) / 70
📍 What the Terms Mean
- Pensionable Salary: The average of your basic salary + dearness allowance (DA) for the last 60 months (5 years) of service, capped at ₹15,000 per month under the current system.
- Pensionable Service: Total number of years you contributed to EPFO. A maximum of 35 years is considered for calculation.
💰 Typical Pension Scenarios
🟢 Maximum Pension
If you work for 35 years and your average salary (basic + DA) was ₹15,000:
- Pension = (15,000 × 35) ÷ 70 = ₹7,500 per month
So, under current rules, the maximum normal pension you can get is around ₹7,500 per month.
🟡 Example with 20 Years of Service
Suppose you worked for 20 years at an average salary of ₹15,000:
- Pension = (15,000 × 20) ÷ 70 = ₹4,285.71 per month
This would be your monthly pension in this case.
🔹 Shorter Service
With a minimum service of 10 years, using the same salary ceiling:
- Pension = (15,000 × 10) ÷ 70 ≈ ₹2,143 per month
This shows how years of service directly affect your pension amount.
📈 Proposed Changes Could Raise Pension
Currently the wage ceiling for calculating pension is ₹15,000, which limits pension amounts. However, there have been proposals to raise this ceiling:
- If the ceiling increases to ₹21,000, the maximum pension becomes about ₹10,050 per month (21,000 × 35 ÷ 70).
- If raised further (e.g., to ₹30,000), the maximum pension could reach around ₹15,000 per month.
These changes are under discussion and not yet finalised.
📉 Minimum Pension and Other Rules
- The minimum pension under EPS is currently ₹1,000 per month, but there are ongoing demands to increase it to a more livable amount (e.g., ₹7,500).
- Your pension payment only begins when you reach the qualifying age (typically 58). If you choose to retire early, your pension will be reduced proportionally.
🧾 Important Considerations
- Employer Contributions: Only the employer’s portion of EPS (8.33% of salary) goes into your pension calculation; your own share goes to your EPF savings.
- Transfers & service Years: If you change jobs frequently, ensure your EPS service years are consolidated in your EPF account, as this affects pension calculations.
- Pension starts at 58: You can withdraw earlier, but may lose eligibility for full pension if you leave before 10 years or retire before 50.
⭐ Key Takeaways
- The EPFO pension is based on your average last salary and years of service.
- Maximum monthly pension currently is ₹7,500 with 35 years of service at the wage ceiling.
- Minimum pension is ₹1,000 per month under current rules.
- Proposals to raise the pension ceiling could significantly increase payouts in the future.
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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