For most private sector employees, retirement planning depends a lot on the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS). While EPF is often discussed, many people are still confused about how EPS works and how much monthly pension they will receive after retirement.
In this article, we explain in very simple language how you can calculate your monthly pension under EPS, what the eligibility rules are, and how your years of service and salary affect your pension amount. This is especially useful for those doing private jobs and looking for financial stability in their old age.
What Is EPS and Who Gets It?
EPS stands for Employees’ Pension Scheme. It is managed by the Employees’ Provident Fund Organisation (EPFO). The main aim of EPS is to provide a fixed pension to private sector employees after they retire.
To get a pension under EPS, an employee must work for at least 10 years in an organisation where EPF is deducted and contributed regularly. The pension starts only after the age of 58 years.
How Is the EPF and EPS Amount Divided?
Every month, 12% of your basic salary plus Dearness Allowance (DA) is deducted as your share towards EPF. This amount is matched by your employer, who also contributes 12% of your basic + DA.
But here’s the important part:
- Out of the employer’s 12%, 8.33% goes to EPS.
- The remaining 3.67% goes to EPF.
So, EPS is not something extra. It comes from your employer’s share only.
Pension Eligibility Rules You Should Know
Before we get into how to calculate your pension, let’s first understand the eligibility:
- Minimum 10 years of service is a must to get EPS pension.
- Pension starts at the age of 58. You can apply earlier, but the pension amount will be reduced.
- You can delay the pension up to 60 years to get extra benefits.
- The maximum number of years considered for pension is 35 years.
- EPS pension applies only to employees who joined the organised sector after 15 November 1995.
The Simple Formula to Calculate Your EPS Pension
Here is the standard formula used to calculate your EPS pension:
📌 EPS Pension = (Pensionable Salary × Pensionable Service) / 70
Where:
- Pensionable Salary = Average of your last 12 months’ basic + DA
(Maximum considered: ₹15,000) - Pensionable Service = Total number of years you’ve worked in an EPS-eligible job (Max: 35 years)
Let’s understand this better with examples.
Example 1: If You Work for 35 Years
- Pensionable Salary = ₹15,000
- Pensionable Service = 35 years
📍 EPS Pension = (15,000 × 35) / 70 = ₹7,500 per month
This is the maximum monthly pension under the current system. Even if you earn more than ₹15,000, EPFO still considers ₹15,000 as the limit for pension calculation.
Example 2: If You Work for 20 Years
- Pensionable Salary = ₹15,000
- Pensionable Service = 20 years
📍 EPS Pension = (15,000 × 20) / 70 = ₹4,285.71 per month
So if you work for 20 years, you will get around ₹4,285 as monthly pension.
Example 3: If You Work for 10 Years (Minimum Eligibility)
- Pensionable Salary = ₹15,000
- Pensionable Service = 10 years
📍 EPS Pension = (15,000 × 10) / 70 = ₹2,142.86 per month
This is close to the minimum amount. However, under EPS rules, the government ensures at least ₹1,000 as minimum pension even if the calculation gives you less.
Extra Benefits for Delaying Your Pension
If you delay your pension claim till the age of 60 instead of 58, you can earn 8% more pension for each year you delay.
For example:
- At age 58 = ₹5,000
- At age 59 = ₹5,400
- At age 60 = ₹5,800
On the other hand, if you take pension early (say at 55), you will get 4% less for each year.
So it’s often better to wait until 58 or 60 to get the full benefit.
Can You Increase Your Pension Amount?
Right now, EPFO limits the pensionable salary to ₹15,000. This means even if your basic + DA is more, you will still get pension based on ₹15,000.
However, in 2022, the Supreme Court gave a chance to certain employees to opt for higher pension by contributing more based on actual salary. This is still under process, and only applicable if:
- You were in service before 2014.
- You and your employer had contributed higher than ₹15,000/month towards EPF.
You need to fill a joint option form for this through your employer if eligible.
What Happens If You Leave Job Before 10 Years?
If you leave the job before completing 10 years of service:
- You will not get monthly pension.
- You can withdraw the EPS amount after a few months as a lump sum.
- The amount will be calculated based on a withdrawal table shared by EPFO.
So, if you are close to completing 10 years, try to stay a little longer and become eligible for lifetime monthly pension.
Summary of EPS Pension Points
| Condition | Details |
| Minimum Service Required | 10 Years |
| Pension Starts | At Age 58 (full), or 60 (with bonus) |
| Maximum Pension | ₹7,500 per month |
| Pension Formula | (Salary × Service) / 70 |
| Max Pensionable Salary | ₹15,000 per month |
| Extra Benefit on Delay | 8% per year after 58 till 60 |
| Reduction for Early Claim | 4% less per year before 58 |
