After 40 years of working, how much pension will you receive? Indeed, there is a pension plan available for private sector employees as well. Nevertheless, this plan is intended for employees in the formal sector. EPFO oversees the management of the program. Simultaneously, the employee and the employer (company) both make contributions to the EPF account. Additionally, the government sets the EPF interest rates annually. For instance, in the fiscal year 2022-23, EPF garnered a yearly interest rate of 8.1 percent. EPF is a fund where a significant sum of money is accumulated over time until retirement.
What is the full equation of EPF?
This example can help to explain this. If your basic salary and dearness allowance combined amount to Rs 15,000. If you are 40 years old, you can save Rs 27.66 lakh by the time you retire at 58, but remember, the EPF scheme only allows contributions until age 58.
Below is the method for calculating EPF
Gross Salary includes Basic Salary and Dearness Allowance, totaling Rs 15,000.
Age at present = 40 years
Age of retirement is 58 years old.
Monthly contribution from employees equals 12%.
Employer’s monthly contribution equals 3.67%.
Annual interest rate on Employees’ Provident Fund is 8.1%.
Yearly increase in salary equals 10%
The account balance of the Maturity Fund is Rs 27.66 lakh when the individual reaches the age of 58.
The EPF account puts aside 12% of the employee’s basic salary and dearness allowance. Nevertheless, 12 percent of the employer’s total is split into two separate deposits. Out of the 12 percent contribution from the employer, 8.33 percent is put into the Employee Pension Account and the remaining 3.67 percent is allocated to the EPF account.
