EPFO: One question and fear always remains in the minds of crores of employees working in the private sector – security in old age. Unlike a government job, there is no tied pension here, due to which it is natural to be worried about the future. But, if you are a member of the Employees Provident Fund Organization (EPFO) and your PF gets deducted, then you do not need to be disappointed at all. EPFO’s EPS scheme is no less than a boon for private employed people. If you are planning to retire in the year 2025 or later, then it is very important for you to know how much money you will get every month after your job ends.
The money deducted from salary becomes a stick for old age.
First of all, it is important to understand the entire process as to where the money received after retirement is deposited from. When PF money is deducted from your salary every month, you might think that it is just a savings. Actually, a part of the amount deducted from your salary is deposited in your Provident Fund (EPF), while the other part is deposited by your company. A large part of the contribution made by the company goes directly into the Employees Pension Scheme (EPS).
This is the accumulated capital which gradually accumulates during the job and later takes the form of pension. However, to avail this benefit, EPFO has set some conditions. To become eligible for pension, it is mandatory for an employee to have at least 10 years of service (pensionable service). Generally, full pension is available at the age of 58 years, but if needed, there is an option to take reduced pension at an even younger age.
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You can calculate your pension yourself through the formula decided by EPFO. Its formula is: (Pensionable salary × total years of service) / 70.
There is a very important thing to be noted here which people often ignore. For calculating pension, your maximum salary limit (Basic Salary + DA) is considered to be Rs 15,000 per month. This means that even if your basic salary is in lakhs, the pension will be calculated on the basis of Rs 15,000 only. ‘Years of service’ means the total number of years you have contributed to the EPS account.
How much will you earn when you retire in 2025?
Let us understand this entire mathematics through an easy example. Suppose Kanhaiya is an employee, who is going to retire in the year 2025. For example let us assume that his total tenure of employment or contribution to his EPS till that time is 50 years (this is a maximum example). Since the maximum salary limit for calculating pension is fixed at Rs 15,000, then Kanhaiya’s pension will be calculated like this, 15,000 (salary) × 50 (years) ÷ 70 = Rs 10,714 (approximately)
According to this, Kanhaiya will get a pension of about Rs 10,714 every month after retirement. But there is another twist in this. If Kanhaiya does not wait till he completes the age of 58 years and starts taking pension from the age of 50, he will have to suffer loss. According to the rules, they will get 4% less pension every year. At the same time, if they postpone pension till 60 years instead of 58, their pension amount will increase.
Also read- EPFO: There will be no tampering with your pension money! Department will correct mistakes in EPS contribution