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New Delhi:

Employees working in the private sector often worry about how they will survive in old age, because unlike government employees, they do not have a direct pension system. After all this hard work of a lifetime, it is natural to be worried about future financial security. But if you are an active member of the Employees Provident Fund Organization (EPFO) and PF is deducted from your salary every month, then this worry of yours can be relieved to a great extent. Especially for those people who are going to retire in the year 2026, it is very important for them to know today how much amount they will get every month under the Employee Pension Scheme (EPS) after the end of their job.

How does PF become a support for your old age?

Most of the people working in private jobs have the misconception that the entire money deposited in the PF account is just a lump sum savings, which will be received together on the day of retirement. Whereas in reality its mathematics is slightly different. The portion deducted from your basic salary is directly deposited in your provident fund (PF). Additionally, the same contribution is made by your company, but a larger portion (8.33 per cent) of the company’s contribution is directly transferred to your pension account (EPS). This is the accumulated capital that gradually accumulates during your working years and becomes a strong source of income for you every month after retirement.

To become eligible for pension, these conditions have to be fulfilled

To avail pension every month from EPS, employees have to fulfill some necessary conditions. The first and essential condition is that the employee must have completed at least 10 years of ‘pensionable service’ in his entire career. Without this minimum period no one becomes entitled to pension. Apart from this, it is considered necessary for the employee to be 58 years of age to avail the full pension amount without any deduction.

Calculate your complete calculations yourself with this easy formula

To get an accurate estimate of your monthly pension, you do not need to visit any financial advisor or office. EPFO has fixed a very transparent and simple formula for pension calculation.

It is important to understand an important technical issue here. As per current EPFO ​​rules, the maximum salary limit for calculating pension has been fixed at Rs 15,000 per month. This simply means that even if your current basic salary is in lakhs, the entire mathematics of your pension will be calculated on the basis of this maximum limit of Rs 15,000. Here ‘years of service’ means the total period for which you have actively contributed to the EPS.

Big loss can happen due to age, understand with example

This entire process can be easily understood with the example of an employee named Kanhaiya, who is going to retire in the year 2026. Suppose the total period of his EPS contribution at the time of retirement is 50 years (period calculated under the rules). Since the maximum salary limit is fixed at Rs 15,000, their pension will be calculated like this:

$$\text{Monthly pension} = \frac{15,000 \times 50}{70}$$

According to this calculation, Kanhaiya will get a fixed pension of around Rs 10,714 every month after retirement. However, retirement age is a big factor in this scheme. If Kanhaiya does not wait for the completion of 58 years of age and starts his premature pension at the age of 50, he will have to suffer a huge financial loss. Under EPFO ​​rules, if pension starts before 58 years, the total pension amount is reduced by 4 percent for every year.