New Delhi: The EPFO is responsible for managing the retirement funds and pensions of employees in the private sector. This organization takes care of both the PF and pension funds. The PF that your company deducts from your salary is placed into your EPF and EPS accounts. The funds in your EPS account will contribute to your future pension. On the other hand, the money in your EPF account builds a significant retirement fund.
Both EPF and EPS are overseen by the Employees’ Provident Fund Organization (EPFO). EPFO is a key statutory body functioning under the Ministry of Labor and Employment. It is tasked with distributing your pension. If you have worked for a specific duration and your PF has been deducted, you qualify for a pension. To be eligible for a pension, you need to have worked for a certain length of time.
So, if you worked for five years and your PF was deducted during those five years, would you be entitled to a pension? Additionally, how much money would be accumulated in your EPF account over these five years? Let’s explore the answers to both of these questions.
What pension will you receive after 5 years of service?
To find the answer, we checked the EPFO website. We discovered that to qualify for a pension under the EPFO, you must have completed a minimum of 10 years of eligible service.
As per the EPFO website, the Employees’ Pension Scheme, 1995, established under Section 6A of the EPF and MP Act, 1952, offers pension benefits to eligible employees of establishments that fall under the Act. It guarantees a monthly pension upon retirement, early retirement, or permanent disability, and also provides a family pension benefit in the event of the member’s death.
The employer contributes 8.33% of the salary, while the central government adds 1.16% (subject to a salary ceiling) to the pension fund. Members who have served for at least 10 years are eligible for a pension.
What will be the total amount in your EPF account after working for 5 years?
The funds in your EPF account are determined by your salary. A deduction of 12% from your basic salary goes into your PF, and your employer matches this contribution. However, there is a basic cap of Rs 15,000. This means that regardless of whether your salary is in the lakhs or crores, your PF deduction will still be based on Rs 15,000.
The employer also contributes 12% of your basic salary, with part of this contribution going to your EPF and the rest to your EPS account. Notably, employees do not contribute to EPS, so the employer is solely responsible for this part.
If your basic salary is Rs 15,000, then Rs 1,800 will be deducted, and your employer will match this amount. However, a portion of the employer’s contribution is allocated to EPS. If your employer adds Rs 550 to your EPF account, your total monthly contribution becomes Rs 1,800 + Rs 550 = Rs 2,350. Over 12 months, this totals Rs 28,200 for one year, and over 5 years, it amounts to Rs 28,200 * 5 = Rs 1,41,000.
Additionally, the government provides interest on this amount. The current EPFO interest rate is 8.25%, but this rate can change each year. Therefore, after five years, without considering interest, your EPFO account will hold a total of Rs 141,000.
