Private employees often face confusion regarding pensions. Most people believe that only government employees receive regular pensions after retirement. However, the truth is that employees working in the private sector are also entitled to pensions through the Employees’ Provident Fund Organization (EPFO). If you are employed in a private company and your PF is deducted, you become a member of the Employees’ Pension Scheme.
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How to get a pension under EPFO
The Employees’ Pension Scheme, known as EPS-95, is an important part of the EPFO. This scheme was started with the aim of providing financial assistance to employees as they age. Every month, a fixed amount is deposited from the employee’s PF account into the pension fund. As soon as an employee reaches the age of 58 and has served for 10 years or more, they become eligible to receive a monthly pension.
What is the minimum pension?
Currently, the minimum pension under EPS-95 is Rs. 1,000 per month. This limit was set in 2014 and has not been revised since then. Amidst persistent inflation and rising expenses, this amount is considered too low, leading many employee organizations to demand an increase.
Pension hike expected from May 2025
According to several reports, the government is considering increasing the minimum pension under EPS to Rs. 7,500 per month. It is being said that the new pension will include dearness allowance (DA) and will be updated twice a year to ensure it remains in line with the actual cost of living. However, some reports suggest that the CBT may agree to increase the minimum pension to only Rs. 2,500, instead of the 7.5-fold increase. A final decision on this is still pending.
Who is eligible for a pension?
To receive a pension from the EPFO, it is mandatory for an employee to be an EPF member. Additionally, the employee must have at least 10 years of continuous service. Regular pension payment begins only after attaining the age of 58.
How Pension is Determined
Pension under EPS is calculated using a prescribed formula. The formula is:
Pension = (Pensionable Salary × Pensionable Service) ÷ 70
Here, pensionable salary refers to the employee’s average basic pay and dearness allowance for the last 60 months, with an upper limit of ₹15,000 per month. Pensionable service refers to the employee’s total service period. If a member completes 35 years of full service, they can receive a maximum pension of ₹7,500 per month.
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Maximum Pension Allowance Â
Since the maximum limit for pensionable salary is ₹15,000, applying this formula, a member can receive a maximum pension of ₹7,500 per month, provided their service period is complete and continuous.
