Big update revealed regarding EPFO. If you’re working and thinking about your future pension, the EPFO (Employees’ Provident Fund Organization) pension scheme could be a great option for you. A common question people have is about how much pension they can expect if they’ve only worked for 10 years. In this article, we’ll dive into the details of the EPFO pension scheme and explore how it can affect your financial future.

 

So, what exactly is the EPFO pension and how does it function? The EPFO pension is known as the “Employee Pension Scheme (EPS),” which is a key component of the EPF (Employee Provident Fund). Each month, a portion of your salary is deducted, with some going to the EPF and some to the EPS. This scheme is designed to help employees maintain financial stability after they retire.

 

How do contributions to EPS work?

12% of your basic salary and dearness allowance (DA) is put into the EPF. Your employer also contributes 12%, with 8.33% of that going to the EPS. The maximum you can contribute to EPS is Rs 1250 per month if your basic salary is Rs 15,000 or more.

 

Who can benefit from EPS?

Employees who have served for at least 10 years are eligible. If you reach 58 years of age, you can receive a full pension, and there’s an option for a reduced pension starting at age 50.

 

Now, how much pension can you expect after 10 years of service?

 

If you’ve worked for 10 years, your pension will be calculated using this formula:

 

Pension = (Pensionable salary × Total years of service) ÷ 70

 

“Pensionable salary” typically refers to the average of your last 5 years’ basic salary and dearness allowance. For example, if your pensionable salary is Rs 15,000 and you’ve worked for 10 years, your monthly pension would be:

 

= (Rs 15,000 × 10) ÷ 70

= Rs 2,142 per month.

 

Key advantages of the EPFO pension

 

1. Financial security for life

 

The EPFO Pension Scheme offers a pension for life. Once you start receiving it, you’ll enjoy its benefits for the rest of your days.

 

2. Widow and family pension benefits

 

If the pensioner passes away, their spouse will receive 50% of the pension. Additionally, children can benefit from an extra 25% pension.

 

3. Early pension option (starting at age 50)

 

If someone wants to retire and start receiving their pension at 50, they can do so, but the amount will be lower. A 4% deduction will apply in this case.

 

4. EPFO pension is distinct from other income sources

 

The EPFO pension is a government-backed scheme, separate from private retirement funds. Since it’s guaranteed by the government, it comes with no risk.

 

Ways to boost your EPFO pension

 

If you’re aiming for a higher pension at retirement, consider these strategies:

 

1. Extend your years of service

 

One of the simplest ways to increase your EPFO pension is to work longer. The more years you contribute to the EPS, the larger your pension will be.

 

2. Aim for a higher salary

 

Your pension is closely tied to your “pensionable salary.” A higher salary means a higher pension.

 

3. Maximize your EPS contributions

 

Many people fail to transfer their PF accounts, which can disrupt their EPS service period. Avoid this by keeping your EPF account linked to the same UAN (Universal Account Number).