The Employee Pension Scheme (EPS) provides a monthly pension to salaried employees after retirement. The pensionable salary is capped at ₹15,000, and the pensionable service is the total number of years worked, with a minimum of 10 years required to be eligible. For example, with a pensionable salary of ₹15,000 and 25 years of service, the monthly pension would be ₹5,357. To claim this benefit, employees need to fill out Form 10D and submit it to the EPFO after retirement.
Planning for retirement can be tricky, but the Employee Pension Scheme (EPS) makes it a bit easier by offering a pension to salaried employees once they retire. If you’ve been contributing to the EPF and have completed at least 10 years of service, you’re eligible to receive a pension. Curious about how much you might get? Don’t worry! There’s a simple formula to calculate it, and we’ll break it down for you step by step so you can estimate your monthly pension in no time.
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What is EPS?
EPS is a government-backed scheme that provides pension to employees who have served for at least 10 years in an organization covered under the EPFO. The pensionable service must be rendered before the employee reaches the age of 58.
- The contribution to the EPS is made by your employer, with 8.33% of your basic salary (capped at ₹15,000 per month) being diverted from the employer’s EPF contribution.
- Formula for EPS Pension Calculation
- The monthly pension under the EPS is calculated using the following formula:
- Monthly Pension=Pensionable Salary × Pensionable Service/70
Where:
- Pensionable Salary: This is the average of your last 60 months’ basic salary before retirement. As per the current rules, the pensionable salary is capped at ₹15,000 per month.
- Pensionable Service: This is the number of years you’ve worked and contributed to EPS. Partial years beyond 6 months are rounded up to the next year.
Key Points to Consider:
- Pensionable Salary Cap: The pensionable salary is capped at ₹15,000 per month. Even if your basic salary exceeds ₹15,000, for the purpose of calculating EPS pension, the salary considered is ₹15,000.
- Pensionable Service: To receive pension benefits, you must have completed at least 10 years of pensionable service. The maximum number of years for pension calculation is capped at 35 years.
- Early Pension: You can claim early pension starting at the age of 50, but there will be a reduction of 4% for each year you retire early.
- Deferred Pension: You can also defer your pension till the age of 60, which will give you an additional 4% increase in pension for each year you defer.
Example Calculation
- Let’s assume the following scenario:
- Your average pensionable salary over the last 60 months is ₹15,000 (as per the cap).
- You have completed 25 years of pensionable service.
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Using the formula:
Monthly Pension=15,000 × 27/70=₹5,357.14
So, your monthly pension will be ₹5,357.
How to Apply for EPS Pension
To claim your EPS pension, you need to follow these steps:
Complete the Form 10D: This form needs to be filled out to claim your pension after you retire.
Submit to EPFO: After filling the form, submit it to the EPFO along with your pension claim.
Link your UAN: Your Universal Account Number (UAN) must be linked to your EPF account.
EPS pension is a valuable benefit for salaried employees in India, providing financial security post-retirement. Understanding how the pension is calculated can help you plan your retirement better.
