EPFO Pension: If you are also working and wondering how much pension you will get from EPFO after 40 years of service, then this news can be very important for you. Employees Provident Fund Organization (EPFO) is an important scheme for the retirement of working people in India, which works for their financial security. This scheme is very important especially for employees working in the private sector, as it helps in creating a large fund at the time of retirement.
What is the equation of EPFO scheme?
EPFO (Employee Provident Fund Organisation) is a scheme under which both the employee and the employer (company) together contribute for the future of the employee. This contribution is 12-12 percent of the employee’s basic salary and dearness allowance (DA). Apart from this, the government also fixes the interest rate on EPF every year, which helps in increasing the retirement fund. If you want to know how much pension you will get after contributing to EPF for 40 years, then it will be easy to understand it with an example.
Understand the benefits of EPF with an example
Suppose, your basic salary and dearness allowance together is Rs 15,000 per month, and your age is 40 years. Now you will work for 18 years and your retirement age will be 58 years. During this period, let us take some figures to understand how the total contribution deposited in your EPF account and the interest received on it works.
– Basic Salary + DA: Rs 15,000
– Current age: 40 years
– Retirement age: 58 years
– Employee Monthly Contribution: 12% (Rs 1800 per month)
– Employer Monthly Contribution: 12% (Rs 1800 per month)
– Interest rate on EPF: 8.1% per annum
– Annual salary growth: 10%
Based on this, after 18 years i.e. at the age of 58, you can have a retirement fund of Rs 27.66 lakh. This figure is formed when you regularly contribute to the EPF account and get an interest rate of 8.1% annually.
How does EPF contribution work?
Along with your contribution to the EPF account, your company also makes a major contribution. 12% of the basic salary and dearness allowance of the employees is deposited in the EPF account. However, the company’s contribution is slightly different. The company’s 12% contribution is divided into two parts:
1. 8.33% goes to the pension scheme (EPS).
2. 3.67% is deposited in the EPF account.
Thus, in total, about 24% (employee and employer contributions combined) is deposited in your EPF account every month. A part of this goes to the pension account, which you will get in the form of pension after retirement.
How will the pension be determined?
The amount of pension determined by the EPFO depends on the contribution of the employee and his entire tenure. The higher the contribution, the higher is the possibility of getting pension. Apart from this, the tenure of the employee also affects the pension amount. After retirement, this pension amount can be helpful in meeting your needs.
Other benefits of EPF and pension
EPF can be helpful not only for retirement but also in an emergency situation. An employee can withdraw money from his EPF account for health, education, marriage, home purchase and other purposes. Apart from this, the interest rate on EPF is fixed by the government every year, which keeps your fund growing. For example, the interest rate on EPF in FY 2022-23 was 8.1%. Overall, the scheme run by EPFO is a great way for employees to build a strong retirement fund. If you contribute regularly to EPF for 40 years, then at the age of 58 you can have a good retirement fund, which will help you meet your pension and other needs in the future. So, if you want to secure your future, consider regular contribution to EPF as an important step. This will not only provide you with a stable financial position at the time of your retirement, but it can also be helpful for you in emergency situations.
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