Contribution to the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS) is deducted every month from the salaries of crores of salaried employees working in the private and organized sector. As per EPFO rules, the maximum pensionable wage ceiling for calculating pension is fixed at ₹ 15,000 per month. In such a situation, this question often arises in the minds of employees that if their basic salary is ₹ 15,000 or more, then how much pension will they actually get every month after retirement at the age of 58? Let us understand the complete mathematics of EPS-95 pension and PF in 11 easy questions and answers.
1. How much money is deposited in EPS from your salary every month?
The entire 12% of the employee's basic salary and DA goes into the EPF account only. However, out of the 12% contribution given by the employer (company), 8.33% goes into the EPS account and the remaining 3.67% goes into the EPF account.
At the statutory salary limit of ₹15,000, a maximum of ₹1,250 (8.33% of ₹15,000) is deposited into your pension fund every month by the company. Apart from this, the Central Government also contributes 1.16% on this limit.
2. What is the official formula to calculate pension?
The standard formula for determining the monthly pension under the Employees' Pension Scheme (EPS-95) is:
$$\text{Monthly Pension} = \frac{\text{Pensionable Salary} \times \text{Pensionable Service}}{70}$$
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Pensionable salary: Average salary in the last 60 months before leaving the job (capped at a maximum of ₹15,000).
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Pensionable Service: Total number of years contributed to EPS.
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Denominator 70: A fixed statistical constant (Actuarial Constant) decided under the scheme.
3. How much pension will you get after working for 10 years at a salary of ₹ 15,000?
To get pension, it is mandatory to complete at least 10 years of service.
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Formula: $\frac{15,000 \times 10}{70}$ = approximately ₹2,143 per month.
4. What will be the pension figure after 15, 20 and 25 years of service?
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On 15 years of employment: $\frac{15,000 \times 15}{70}$ = ₹3,214 per month.
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On 20 years of service: Bonus weightage of 2 years is given on completion of 20 years of service (total 22 years). $\frac{15,000 \times 22}{70}$ = ₹4,714 per month.
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On 25 years of service: With 2 years of bonus (total 27 years): $\frac{15,000 \times 27}{70}$ = ₹5,786 per month.
5. What is the maximum pension that can be received under EPS-95?
The maximum pensionable service period under the EPS scheme is considered to be 35 years. If an employee completes 35 years of service under the normal pay limit of ₹15,000, he does not get bonus weightage of 2 years (due to the maximum limit of 35 years).
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Maximum normal pension: $\frac{15,000 \times 35}{70}$ = ₹7,500 per month.
6. Does service period become zero on change of job?
No. Whenever you change jobs, you should link and transfer your old and new EPF accounts through Universal Account Number (UAN). Total 'Pensionable Service' is calculated by adding up the tenures spent in all your companies. If you are leaving the job for some time, you can take a Scheme Certificate from EPFO.
7. What happens to pension money if you are employed for less than 10 years?
If your total service period is less than 10 years (say 6 or 8 years) and you do not want to continue further, you are not entitled to pension. In such a situation, you can withdraw the entire amount deposited in the EPS account in lump sum by filling Form 10C.
8. Can I get pension even before the age of 58?
Yes, under EPS rules, employees can take 'Early Reduced Pension' after completing 50 years of age, provided they have completed 10 years of service. However, a permanent reduction (reduction rate) of 4% will be applicable in the pension amount for every year the earlier you start pension before the age of 58 years.
9. Do I get more money by deferring pension after 58 years?
Yes, if an employee does not start his pension even after the age of 58 years and defers it till 60 years (Deferred Pension), then he gets additional benefits. A permanent increase of 4% in pension amount is given starting at the age of 59 years and 8.16% starting at the age of 60 years.
10. How much pension does the family get on the death of the employee?
In case of death of an EPS member, his/her spouse (widow/widower) gets 50% of the member's eligible pension as widow pension for life. Along with this, 25-25% of the widow pension is given as child pension to maximum two children of the family till the age of 25 years.
11. Is a minimum pension of ₹1,000 guaranteed?
Yes, as per the Central Government rules, the minimum pension amount under EPS-95 has been fixed at ₹1,000 per month. Even if an employee's monthly pension calculated under the formula is less than ₹1,000 (say ₹800), he is still given a top-up pension of at least ₹1,000 per month by the government.