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If you work in the private sector and EPF is deducted from your salary, a portion of your contribution also goes towards the EPS (Employees' Pension Scheme). For long-term employees, this serves as a source of regular pension after retirement.

It is worth noting that 12% of your basic salary is deposited into your PF account, and your company (employer) makes an equal contribution. However, out of the company's 12% share, 8.33% goes directly into your pension fund (EPS).

The question now arises: if you have 25 years of pensionable service, what will your monthly pension amount be? Let us understand the calculation.

How much pension will be generated after 25 years of service?
Pension under EPS is calculated based on a specific formula:

Pension = (Pensionable Salary × Pensionable Service) ÷ 70

According to the EPFO ​​pension calculator, the maximum limit for pensionable salary is ₹15,000 per month for cases arising after September 1, 2014. If an employee has a pensionable salary of ₹15,000 and has completed 25 years of pensionable service, the calculation would be—

₹15,000 × 25 ÷ 70

= ₹3,75,000 ÷ 70

= ₹5,357.14

This means that in this example, the employee could receive an EPS pension of approximately ₹5,357 per month.

What will be the annual pension amount?
If the monthly pension is approximately ₹5,357, the annual amount would be—

₹5,357 × 12 = ₹64,284 per year

Thus, assuming 25 years of pensionable service and a pensionable salary of ₹15,000, the annual pension works out to approximately ₹64,284.

It is important to understand what 'pensionable salary' means here.
Many people assume that their EPS pension will be calculated based on their entire salary, but that is not necessarily the case. A prescribed limit applies to the pensionable salary used for calculating the pension. The current EPFO ​​calculator specifies a maximum pensionable salary of ₹15,000 for the period following September 1, 2014.

Therefore, if an employee's actual basic salary is ₹20,000, ₹30,000, or higher, the ₹15,000 cap becomes significant in the standard calculation. However, different rules and calculations may apply in cases eligible for a 'Higher Pension'.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.