EPFO Pension: The Ministry of Labor and Employment announced the Employees’ Pension Scheme (EPS) 2026 on June 29, replacing the EPS-1995 and 1971 Family Pension Schemes. This change has raised questions among the approximately 60 million EPFO members regarding potential alterations in pension rules, the possibility of increased pension benefits, and the need for adjustments in retirement planning. Fortunately, the method for calculating the monthly pension and the requirement of a minimum service of 10 years remain unchanged.
Key points to note
To qualify for a monthly pension under EPS, a minimum of 10 years of pensionable service is necessary. Upon completion of this service period, members will start receiving a monthly pension at age 58. An early pension option is available from age 50, albeit at a reduced rate. Failure to fulfill the 10-year service requirement results in the absence of a monthly pension. In such cases, members can either withdraw their EPS funds or opt for a scheme certificate to link their service with future employment.
Calculation of pension:
– Monthly pension = (Pensionable pay × Pensionable service) ÷ 70
– Pensionable salary is determined by the average basic salary and dearness allowance (DA) over the last 60 months, capped at Rs 15,000 for most employees.
Pension estimates With a pensionable salary of Rs 15,000, a monthly pension of around Rs 2,143 is expected after 10 years of service. After 20 years, the pension may rise to about Rs 4,286, and upon completing 35 years, a maximum monthly pension of Rs 7,500 can be received.
Minimum pension and demands:
The current minimum pension stands at Rs 1,000 per month. If the calculated pension falls below this amount after 10 years of service, the government will bridge the gap. Calls for increasing the minimum pension from Rs 5,000 to Rs 7,500 due to inflation have been ongoing, but an official decision has not been made yet.
Job change considerations:
When switching jobs, it is crucial to transfer both EPF and EPS to the new employer. Premature withdrawal of EPS funds before completing 10 years may lead to a loss of pensionable service, affecting future pension benefits. Transferring EPF using the UAN to the new job ensures continuity of service and aids in meeting the 10-year eligibility requirement, ultimately securing a monthly pension post-retirement.