Pension Calculator: After retirement, luck will favor you, how much pension will you get? EPFO members remember this formula!
EPFO Pension Formula: There is increasing discussion on the benefits of retirement pension for private employees by the Employees Provident Fund Organization (EPFO). This is a scheme for a secure future for employees working in the organized sector in which provident fund and pension benefits are available through EPF and EPS (Employee Pension Scheme). Let us know how pension works under this scheme and how much pension you can get.
Method of contribution under EPF and EPS
EPF and EPS are managed by the Employees’ Provident Fund Organization (EPFO). 12% of the basic salary and dearness allowance (DA) of private sector employees is deposited in the EPF account every month and the same amount is also deposited by the employer i.e. the company. However, the employer’s amount is divided into two parts –
EPS (Employee Pension Scheme) – This accounts for 8.33% of the total contribution.
EPF (Employee Provident Fund) – 3.67% is deposited in it.
Conditions for availing pension facility
To avail pension benefits under EPS, it is mandatory for the employee to contribute for at least ten years. That means, if you work in a company for less than 10 years and do not continue contributing to EPS, then you will not be able to get the benefit of pension. Along with this, pensionable service can be up to a maximum of 35 years.
formula to calculate pension
Pension is calculated by EPFO through a fixed formula:
EPS = Average Salary x Pensionable Service/70
In this:
Average salary means the average salary of last 12 months (Basic Pay + DA).
Pensionable service i.e. total number of years worked (up to a maximum of 35 years).
Maximum pensionable salary is Rs. 15000, making the maximum share of pension Rs. 1250 per month.
Understand pension calculation through example
Suppose the average monthly salary of an employee is Rs 15000 and he has served for 35 years. So the pension amount as per the above formula will be:
EPS = 15000 x 35 / 70 = Rs 7500 per month
In this way the employee can withdraw maximum Rs. from EPFO. Will be eligible for monthly pension of Rs 7500. Whereas the minimum pension is Rs. Can be up to Rs 1000 per month.
How to get pension in less than ten years of service?
If the employee has contributed to the EPS for less than 10 years and does not intend to continue working further, he can withdraw the amount deposited in the EPS in a lump sum. In this situation, the employee will get the option to withdraw the amount from the provident fund itself but will not get pension.
Importance and security of pension plan
The objective of this pension scheme offered by EPFO is to provide financial security to organized sector employees. Getting pension after retirement gives employees the opportunity to remain financially capable, which provides a great relief.
Pension and other benefits of provident fund
Facility to take loan: On the basis of EPFO account, employees also get loan in case of emergency.
Withdrawals for health and education: Even before retirement, employees can make partial withdrawals from their provident fund account for health, education, marriage etc.
Life Insurance: Under the EPFO scheme, employees can also avail life insurance, which provides security to the family.
How to determine eligibility for pension?
The pension amount depends on how many years you have contributed to EPS and what is your average salary. If you work in an organized sector and have contributed 10 years or more to the EPFO scheme then you are eligible to get pension.
