When an employee who has contributed to EPFO for up to 10 years, turns 58, it offers a monthly pension to them.
The Employees’ Provident Fund Organization (EPFO) plays a crucial role in securing the financial future of employees by promoting savings for retirement. Recently, EPFO clarified its pension rules, shedding light on various aspects that affect the pension amount received by subscribers.
Read More: EPFO Update: Govt May Hike Wage Ceiling Under EPFO To Rs 21,000 From Rs 15,000, Say Reports
According to EPFO regulations, an employee who has contributed to EPFO for at least 10 years becomes eligible for a monthly pension upon reaching the age of 58. However, opting to delay the pension until the age of 60 results in an increased pension amount of approximately 8 per cent.
EPFO’s deduction rule mandates that 12 per cent of the employee’s basic salary is allocated to the Provident Fund (PF), with an equal contribution from the employer. Of the employer’s contribution, 8.33 per cent is directed towards the Employee Pension Scheme (EPS), while the remaining 3.67 per cent is allocated to the Provident Fund.
EPFO also encourages subscribers to consider deferring the pension to age 60, as it allows for higher contributions and subsequently, a higher return. Subscribers have the option to apply for early pension starting from age 50, provided they have completed a minimum of 10 years of service. However, opting for an early pension results in a reduced pension amount.
Read More: EPF: Automatic transfer from old to new job. All you want to know
The reduction in pension is calculated at 4 per cent for every year the subscriber withdraws the pension before turning 58. For instance, if a subscriber opts for pension withdrawal at the age of 56, they would receive 92 per cent of the basic pension amount, calculated as (100 per cent – 2 years before turning 58 x 4 per cent).
Furthermore, subscribers below the age of 50 who have completed 10 years of service are ineligible for pension benefits. Upon retirement, they will only receive the funds deposited in their EPF account.
EPFO’s clarification aims to provide clarity and guidance to subscribers regarding their pension entitlements and options. By understanding the rules and making informed decisions, employees can effectively plan for their retirement and secure their financial future.
