If you are a salaried employee and contribute to EPFO every month, you should be aware of the Employee Pension Scheme. If you have contributed to EPFO for 10 years, you become eligible for a pension after retirement. The amount of pension you receive is determined by a formula that considers the total duration of your job. The maximum pensionable service is 35 years.
If you are an EPFO member, learn about the Government’s New Formula that helps calculate how much pension you will receive after retirement.
New Formula to Calculate Pension
The formula to calculate the pension received from EPFO is:
EPS = Average Salary x Pensionable Service / 70
Here, average salary refers to the basic salary + DA (Dearness Allowance), calculated based on the last 12 months. The maximum pensionable service is 35 years, and the maximum pensionable salary is ₹15,000. Due to this, the maximum pension is:
₹15,000 x 8.33 = ₹1,250 per month.
What is the Maximum Pension?
If we calculate the EPS pension with the maximum contribution and years of service, the formula is:
EPS = ₹15,000 x 35 / 70 = ₹7,500 per month.
So, the maximum pension you can receive is ₹7,500 per month, while the minimum pension is ₹1,000. You can use this formula to calculate your pension amount.
EPF Contribution Rules
12% of the basic salary + DA of employees in the organized sector is deposited into EPF every month. The same amount is also contributed by the employer/company. However, the employer’s share is divided into two parts:
- 8.33% goes to the Employee Pension Scheme (EPS)
- 3.67% goes to the EPF
Understanding the Rules
Under the EPS rules, an employee is eligible for a pension at the age of 58. However, if the employee wishes, they can opt for an early pension starting at the age of 50. But, if the pension is withdrawn earlier than 58, it will be reduced by 4% for each year before the age of 58.