Tuesday, October 20, 2020

EPS 95 Pension calculation: With maximum pension capped at Rs. 7500, Easy Calcualion How much you receive

Employees working in the private sector have their provident fund to meet their post-retirement needs. On retirement, the employees get a lump sum amount from their employee provident fund (EPF). In addition, they may start getting a pension under the employees’ pension scheme (EPS). Both EPF and EPS are part of the employee’s contribution that happens during their working life. The minimum pension per month is fixed at Rs 1,000 while the maximum monthly pension amount is Rs 7,500. To know exactly how much monthly pension one will get under EPS, one needs to do EPS calculation or use an EPS pension calculator.


EPS 95 Pension Works?

Here, we first see how EPS works and then use the EPS formula to calculate the monthly pension.
Out of the 12 per cent contribution made by the employer towards employee PF, not the entire portion goes into the provident fund. With basic salary ( for pension purpose) capped at Rs 15,000, 8.33 per cent of the salary is diverted or put into EPS. This means, irrespective of a higher basic salary (above Rs 15,000), each month Rs 1250 of employer’s contribution is put into EPS. Earlier, as the basic salary was capped at Rs 6,500, only Rs 541 was put into EPS.


EPS 95 Pension Calculation Examples

If the monthly basic salary is Rs 15,000 – Rs 1250 Contribution into EPS
If the monthly basic salary is Rs 18,000 – Rs 1250 Contribution into EPS
If the monthly basic salary is Rs 35,000 – Rs 1250 Contribution into EPS
If the monthly basic salary is Rs 14,000 – Rs 1166 Contribution into EPS

Whatever goes into the EPS, the entire corpus stays with the government and the employee starts getting pension after retirement. The amount of monthly pension depends on the number of years of service and a fixed formula.

The balance of the employer’s contribution is put into EPF along with employee’s contribution of 12 per cent of actual basic salary.


EPS calculator

As the pensionable salary is capped at Rs 15,000, the maximum monthly pension is also capped as per the formula.

EPS formula: (Pensionable Salary * service period) / 70.

This is the basic formula of EPS 95 Pension calculation, but actual calculation based on pro-data  basis. 

Here, Pensionable Salary is capped at Rs 15,000 and service period at 35 years (35 Year only for calculation it may more than or less than also). Therefore, irrespective of actual years that one has worked and the monthly basic salary, the maximum monthly pension would be Rs 7,500.


So, after 30 years of job, even if basic salary is higher than Rs 15,000 at the time of retirement, the maximum monthly pension comes to: = (15000 * 30) / 70 = Rs 6429.

To be eligible for EPS pension from age 58, one has to complete a service period of at least ten years. To ensure that one gets the credit for the number of years worked, make sure to opt for ‘scheme certificate’ which helps EPFO keeps a record of your service period.

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