Here's how to calculate pension amount under Employees’ Pension Scheme

Towards the provident fund, both the employer and the employee contribute 12 per cent each to the EPFO account every month. This cumulated share is then contributed to EPF and EPS. Out of the 12 per cent contribution by the employer, 8.33 per cent goes to the pension scheme and another 3.67 per cent is contributed to EPF every month.

If the person completes working for 20 years of service, he/she gets a bonus of 2 years as well.

The Employees’ Provident Fund Organisation (EPFO) manages the retirement benefit schemes for the workers in the private sector. The employees in private organisations, who subscribe to EPFO scheme, can get retirement benefits like pension after superannuation. The employees are eligible to get pension under the Employees’ Pension Scheme (EPS) once they complete a certain number of years in service and other eligibility criteria.

Towards the provident fund, both the employer and the employee contribute 12 per cent each to the EPFO account every month. This cumulated share is then contributed to EPF and EPS.

Out of the 12 per cent contribution by the employer, 8.33 per cent goes to the pension scheme and another 3.67 per cent is contributed to EPF every month.

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EPS criteria for eligibility

To avail pension benefits under EPS, an individual has to meet certain conditions.

He/she should be a member of Employees’ Provident Fund Organisation
He/she should have completed continuous service for 10 years
Pension is available after superannuation at the age of 58

Calculation of pension under EPS

The pension in Provident Fund differs on the pensionable salary of the member and the pensionable service as well. The member’s pension amount is calculated according to the formula devised by the EPFO.

Pensionable salary

It is the average monthly salary in five years (60 months) before the retirement date of the employee.

Pensionable service period

The total period of employment of an EPFO member is considered as the pensionable service. This period under different employers is added at the time of calculating the pensionable service period.

If the person completes working for 20 years of service, he/she gets a bonus of 2 years as well.

However, if the employee withdraws EPS before completing the service period of 10 years and joins another company, he/she will have to start afresh for contributing to the EPS account.

Formula to calculate pensionable salary

Member’s Monthly Pension = (Pensionable salary X Pensionable service period)/ 70

Pension on retirement

Any member becomes eligible for opting pension benefits when they retire at the age of 58 years. In addition to that, it is also necessary for him or her to have served for a period of 10 years at least.

Pension on leaving before being eligible for EPS

In case a member leaves the service before 10 years and attains the age limit of 58 years, he/she can withdraw the accumulated sum at the age of 58 years itself.

Pension on disability during service term

In case of a member becoming completely disabled during his/her service term, then the employee is entitled to a monthly pension irrespective of the minimum required years of service.

Pension to the family on demise of member

A member’s family becomes eligible for the pension benefits in cases such as, if death of the member happens during the service; if the member has completed the 10 years of service, but dies before attaining the age of 58 years; and in case of member’s demise after the commencement of the monthly pension.

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