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EPS Pension Calculation: The biggest financial support for the old age of crores of private sector employees and employed people of the country is the Employee Pension Scheme-1995 (EPS-95) of the Employees Provident Fund Organization (EPFO). Often there is a question in the mind of working employees that how much pension will they get every month after retirement in exchange of the money deducted from the PF account and for this it is necessary to work for at least how many years. As per the official rules of EPFO, if an employee wants to be entitled to a regular pension every month instead of a lump sum fund throughout his life, it is mandatory for him to complete at least 10 years of pensionable service. Without completing 10 years of service, no employee is eligible for monthly pension and he only gets the option to withdraw his deposited money in lump sum.
Under the rules of Employee Provident Fund (EPF), every month 12 percent of the employee’s basic salary and dearness allowance (DA) is deducted in the PF account, and the same amount of 12 percent is also deposited by the employer (company). But this 12 percent company contribution is divided into two parts—8.33 percent of this goes directly to the EPS (pension fund), while the remaining 3.67 percent is added to the employee’s main EPF account. However, under the current EPFO rules, the maximum pensionable salary cap for contribution to the pension fund is set at ₹15,000 per month. This simply means that even if your basic salary is ₹ 50,000 or ₹ 1 lakh, if you have not opted for a higher pension, then the company’s 8.33% contribution will be calculated only on a maximum of ₹ 15,000, that is, a maximum of ₹ 1,250 will be deposited in your pension account every month.
As per EPFO rules, it is necessary to complete service for at least 10 years (i.e. 9 years 6 months or more, which is rounded off to 10 years) to get regular monthly pension. This does not at all mean that you have to work in the same company for 10 consecutive years. Even if you work in different companies, your total service gets added, provided you keep transferring the old PF funds to the new PF account through your UAN instead of withdrawing them while changing jobs. If the total service of an employee is less than 10 years, he is no longer entitled to monthly pension after the age of 58 years and he has to withdraw his pension amount in lump sum only as per Table-D through Form 10C.
The monthly pension paid by EPFO after retirement is calculated by a very simple official formula: Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70. Here ‘pensionable salary’ means the average basic salary of the last 60 months (5 years) before retirement, with a maximum limit of ₹ 15,000. Now if the average pensionable salary of an employee is ₹15,000 and he has completed minimum service of 10 years, then his monthly pension will be (15,000 × 10) ÷ 70 = ₹2,143 per month. At the same time, if an employee completes 20 years or more of service, then an additional bonus of 2 years is also given to him by EPFO, due to which for 20 years of service, the salary for 22 years is (15,000 × 22) ÷ 70 = ₹ 4,714 per month and for a maximum of 35 years of service (37 years including 2 years bonus) (15,000 × 37) ÷ 70 = Pension can be up to ₹7,929 per month.
| Total job duration (in years) | Total calculation year including bonus | pensionable salary limit | Estimated Monthly Pension (in ₹) |
| 10 years (minimum eligibility) | 10 years | ₹15,000 | ₹2,143 per month |
| 15 years | 15 years | ₹15,000 | ₹3,214 per month |
| 20 years (2 years bonus applicable) | 22 years | ₹15,000 | ₹4,714 per month |
| 25 years (2 years bonus applicable) | 27 years | ₹15,000 | ₹5,786 per month |
| 30 years (2 years bonus applicable) | 32 years | ₹15,000 | ₹6,857 per month |
| 35 years (maximum service) | 37 years | ₹15,000 | ₹7,929 per month |
Under EPFO rules, full and without deduction pension is available after completing the age of 58 years. However, if an employee has completed 10 years of service and is in dire need of money, he can apply for ‘Early Pension’ after the age of 50 years. But the thing to note is that for every year you start pension before the age of 58, there is a permanent reduction of 4 percent per year in your total pension amount. For example, if you start pension at the age of 56, you will get 8% less pension. On the other hand, if you defer pension after 58 years till age 60, then you get a total additional pension benefit of 8% at the rate of 4% every year. Therefore, never withdraw your pension fund from PF in a hurry while working, so that your old age remains financially secure after retirement.