Every retired employee needs a monthly pension since it helps him/her to defray the regular expenses one needs in a world tormented by inflation. The Employees’ Pension Scheme or EPS was launched in 1995 and employees who are eligible for the Employees Provident Fund (EPF) scheme are also eligible for EPS.
The formula for pension
Though EPFO has been paying pension for several years now, the amount is not high. The formula to calculate EPS of any employee is calculated according to the following formula: Average Salary x Pensionable Service/70.
The point to remember is that average salary indicates basic salary + dearness allowance (DA). The average of these figures for the past 12 months is considered here.
EPF pension calculation
Here average salary means basic salary + DA. Which is calculated based on the last 12 months. The other point to note is that the maximum pensionable service is regarded as 35 years. A maximum of Rs 15,000 has been fixed as the maximum pensionable salary.
Accordingly, the maximum pension becomes 15000 X 35/70 = Rs 7,500 per month. The minimum pension has been determined at Rs 1,000. If the amount if found to be less than Rs 1,000, it is rounded off to Rs 1,000 and the employee receives this amount every month.
Who is eligible for pension
Just about every employee is not eligible for pension from the EPFO. There are certain conditions that one has to meet to get it. The employee must have spent a minimum of 10 years in service. The other condition is regular pension is paid from the time one completes 58 years of age.
EPF early pension rules
There is another provision for early pension, however. One might claim pension after competing 50 years, but the amount progressively decreases with each year of claiming it earlier before reaching the age of 58. However, one must have completed 10 years in service before he/she becomes eligible to claim a pension.
The pension falls off by 4% for every year before the age of 58. If an employee seeks early pension at the age of 50, he/she will get 8 X 4% = 32% less pension than what he/she would have got at 58 years.
One of the less discussed but vital elements of the Employees’ Provident Fund is the pension. It is managed and paid by the Employees’ Provident Fund when an employee turns 58. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
