EPFO Pension Calculation: How much pension will you get every month after retirement on basic salary of ₹ 13,000 and 20 years of service?

‘Employees’ Pension Scheme 1995′ (EPS-95) run by the Employees’ Provident Fund Organization (EPFO) is a big and reliable means of financial security after retirement for employed employees. This question often arises in the minds of crores of employees working in the private sector that when they complete their long service and retire at the age of 58, how much pension will they get every month from EPFO. If the average basic salary (Basic Pay + Dearness Allowance) of an employee is ₹ 13,000 per month and he has contributed to EPS for 20 consecutive years, then mathematically and as per the rules, what will be his monthly pension? The calculation is very straightforward and clear based on EPFO’s pension determination formula, pensionable salary limit and weightage of additional 2 years bonus on 20 years of service.

Mathematics of contribution in EPF and EPS: Where does how much money go from your salary?

When an employee works in an organized sector company, 12 percent of his basic salary and dearness allowance (DA) is deposited in the EPF account. The employer (company) also deposits 12 percent of the employee’s salary. This 12% share of the employer is divided into two parts:

• Employees Pension Scheme (EPS): Of the 12% employer’s contribution 8.33% Part goes directly into the pension fund (EPS). On a basic salary of ₹13,000 this amount is approximately ₹1,083 per month Is made.

• Employees Provident Fund (EPF): Remanent 3.67% The portion is deposited in the employee’s EPF account (approx. ₹477 per month).

• Employee’s own contribution: The entire 12% (i.e. ₹1,560 per month) of the employee gets added to the EPF account along with interest, which is received as a lump sum fund on retirement.

Official formula for calculating EPS-95 pension

As per EPFO ​​rules, a prescribed mathematical formula is applied to calculate the monthly pension to be received after retirement:

$$\text{Monthly Pension} = \frac{\text{Pensionable Salary} \times \text{Pensionable Service}}{70}$$

This formula contains two main components:

1. Pensionable Salary: The average basic pay and DA of the last 60 months (5 years) preceding the date of leaving the job or retirement is considered as pensionable salary. The maximum salary limit in EPFO ​​is fixed at ₹15,000. Since the salary here is ₹ 13,000, the entire ₹ 13,000 will be considered as pensionable salary.

2. Pensionable Service: The total service period during which regular contributions have been made to EPS.

3. Divisor 70: This is an actuarial constant set under the scheme.

Bonus weightage of 2 years on 20 years of service: Special rule of EPFO

Under EPFO ​​rules, employees who complete 20 years or more of pensionable service and retire at the age of 58 years are given an additional bonus weightage of 2 years of service.

This means that in pension calculation of an employee who has worked for 20 years, the total service period will be considered as $20 + 2 = 22$ years.

Accurate calculation of pension on salary of ₹13,000 and 20 years of service

Situation 1: Superannuation retirement at age 58 (including 2 years bonus)

• Pensionable Salary: ₹13,000

• Total effective service period: $20 + 2 = 22$ years

• Formula: $\frac{13000 \times 22}{70}$

• Calculation: $\frac{286000}{70} = 4085.71$

• Total monthly pension: ₹4,086 per month (About)

Case 2: Normal calculation without bonus weightage (if 2 years bonus not included)

• Pensionable Salary: ₹13,000

• Service period: 20 years

• Formula: $\frac{13000 \times 20}{70}$

• Calculation: $\frac{260000}{70} = 3714.28$

• Total monthly pension: ₹3,714 per month (About)

Therefore, on normal retirement at the age of 58, the employee will receive approximately ₹4,086 Will get assured pension.

Mandatory eligibility conditions and important rules for getting pension

EPFO has set some mandatory conditions to avail the benefit of monthly pension:

• Minimum 10 years of service: A minimum of 10 years (120 months) of continuous service is mandatory to become entitled for monthly pension under EPS. If the service is less than 10 years, then pension is not received but the deposited amount of EPS can be withdrawn in lump sum (Scheme Certificate / Withdrawal Benefit).

• Standard age of retirement (58 years): Full monthly pension starts only on completion of 58 years of age.

• Rule of early pension (50 to 57 years): If an employee wants to take early pension after the age of 50 years and before the age of 58 years, then for the number of years before the age of 58 years he will start the pension, per year. Pension cut at the rate of 4% Will be done. For example, taking pension at the age of 55 will result in $3\times 4\% = 12\%$ less pension.

• Deferred Pension: If a member postpones taking pension after 58 years till the age of 60, then he will have to pay Rs. 4% additional pension Get the benefit of.

How to keep pension service safe after changing job?

Whenever you leave one company and go to another company, you must transfer the old PF account to the new PF account through your Universal Account Number (UAN). By doing this your EPS service record keeps getting added. If you leave the job midway and do not join the new company immediately, you can protect your service period by getting a ‘Scheme Certificate’ from EPFO.