Calculating EPS pension: What to expect with Rs 50k pay, 35 years of service
The EPS of Employees Pension Scheme is one of the two schemes that are managed by the Employees' Provident Fund Organisation (EPFO). While EPF (Employees' Provident Fund) accumulatio is paid as a one-time lump sum payment to the employee, EPS pays a pension every month.
Kolkata: EPS or the Employees Pension Scheme arguably plays second fiddle to the EPF(Employees' Provident Fund) in the mental map of employees of the country but it is no less important. Though the amount is not big, EPOS guarantees a steady stream of monthly pension to all employees of the formal sector of India. An employee becomes eligible to get a monthly pension after completing 10 years of service. He/she also has to be past the age of 50 years.
The EPFO sets guidelines and interest rates on EPF deposits. The pension fund body also determines wage cap for calculating EPS contributions. While the wage ceiling was Rs 6,500 in 2014, it has been then raised to Rs 15,000 where it is maintained till now. This has a very significant meaning -- no matter whatever your salary, the pension payable to an employee will be calculated on the basis of the upper limit of Rs 15,000 limit. Though there is market grapevine that this limit will be raised in shortly, there has been no announcement to that effect so far.
EPS pension formula
There is a straightforward formula for calculating the EPF pension, pr EPS, of an employee. It goes like this: EPS = (Average pensionable salary x pensionable service)/70.
It is clear that the pension will depend on two factors -- the average pensionable salary and the pensionable service. Here, the pensionable salary is of great significance. Suppose a person has a salary -- basic salary + DA is considered -- that is more than Rs 15,000 a month. However, the salary that will be considered while calculating the pension will be Rs 15,000 and not a rupee more than that. By pensionable service one means the total number of years an employee works and contributes to both EPF and EPS.
EPS pension calculation
Say a person works for 35 years of service and gets Rs 50,000 a month. In the formula, one has to use Rs 15,000 as the pensionable salary (and not Rs 50,000). But one can use 35 in place of the pensionable service. This will work out to be Rs 7,500. If one works for 30 years, the monthly pension that one is becomes eligible for is Rs 6,428. It is clear from the above calculation that the EPS pension can increase if the wage ceiling is raised by EPFO