EPF Pension Rules: For those contributing to the EPF, pension calculation is a critical element in retirement planning. The Employees’ Provident Fund Organization or EPFO has laid down definite rules about pension eligibility as well as the amount one gets after retiring. If you have contributed for a minimum of 10 years, you are eligible for a pension. Let’s dissect how the pension is calculated and how much you will receive after 60 years.
How is Money Deposited in a PF Account?
If you are working in the private sector, 12% of your salary is deducted for your PF account. Your employer also deducts an equal share. Of this, 8.33% is contributed to the pension fund, and the balance 3.67% is deposited in your PF account.
EPF Pension Rules
According to EPFO regulation, the worker has to make contributions towards the PF account of at least 10 years before being qualified to get a pension. You get a pension after 50 years, but at a 4% decrease yearly. When you claim at age 58 years, you are paid the maximum pension. Finally, if you postpone the claim to 60 years, there is an enhancement in pension to the tune of 8%.
EPF Pension Calculation Formula
The pension is calculated by following a standard formula based on your pensionable salary and service period:
Pension = (Pensionable Salary × Pensionable Service) ÷ 70
Your maximum pensionable salary is ₹15,000 a month. This translates to ₹1,250 (15,000 × 8.33%) being credited to your pension fund each month.
How Much Pension Will You Get at 60?
If you begin work at the age of 23 and retire at 58, you would have worked for 35 years. Using the formula:
15,000 × 35 ÷ 70 = ₹7,500 a month
If you take your pension at the age of 60 rather than 58, your pension would rise by 8%, with you receiving a larger payment. But the ultimate pension payment depends on the average of your salary over your last 60 months of employment.