EPFO Pension: 12% of Basic Salary + DA of employees working in the private sector is deposited in EPF every month. The same amount is also deposited by the
employer/company. However, the company’s share is divided into two parts. Out of this, 8.33% goes to the Employee Pension Scheme (EPS) and 3.67% goes to EPF every month. If an employee’s share is deposited in EPS for a minimum of 10 years, then he becomes entitled to get pension from EPFO after retirement.
The amount of pension he will get is calculated by a formula by looking at his years of service and total contribution. Know that formula here and understand how much pension you will get after retirement?
Pension is calculated by this formula
The formula used to calculate how much pension you will get from EPFO after retirement is- EPS= Average Salary x Pensionable Service/ 70.
Understand how the formula will be used
In this formula, average salary means basic salary + DA. Which is calculated on the basis of last 12 months. Pensionable service means how many years you have worked. Maximum pensionable service is 35 years. If the maximum pensionable salary is Rs 15 thousand. From this, the maximum pension share is 15000×8.33= Rs 1250 per month.
Understand with an example
To understand EPS pension calculation on maximum contribution and years of service- Suppose your average salary is Rs 15,000 and you have worked for 35 years. In such a case, EPS= 15000 x35 / 70 = Rs 7,500 per month.
In this way, the maximum pension an employee can get from EPFO is Rs 7,500. Whereas the minimum pension can be up to Rs 1,000. You can also calculate your pension amount by using this formula based on your average salary and total years of service.
Remember this
Remember that this formula of EPS will be applicable to employees working in the organized sector after 15 November 1995. There are different rules for employees before this. On the other hand, there is a constant demand from employee organizations that the maximum limit of average salary for pension should be increased in view of the current wage structure and inflation rate.
If the contribution in EPS is less than 10 years, then if the employee’s contribution in EPS is less than 10 years and he does not intend to continue working in future, then in such a situation, the employee can make full and final settlement by withdrawing the amount deposited in EPS i.e. Pension Account along with the EPFO amount at any time.
