EPFO PensionImage Credit source: ai generated
EPFO: Every person working in the private sector sees the PF deduction in his salary slip, but the pension (EPS) part often remains a puzzle. PF interest and principal amount are clearly visible in the passbook, but the pension column always seems confused. Actually, this scheme of Employees Provident Fund Organization (EPFO) is not just a savings, but it is a great support for your old age. In recent times, the changes in the rules and the ongoing discussions regarding the salary limit have raised many questions in the minds of the common employee. If you are also in a private job, then it is very important to understand when and on what conditions you will receive your hard-earned money in the form of pension.
The two biggest conditions for getting pension
To become eligible for pension, EPFO has laid down two strict conditions, without fulfilling which one cannot get the benefit of monthly pension. The first and most important condition is to complete 10 years of ‘pensionable service’. It is important to understand here that the method of counting years of service is different. If you have changed job in between and have withdrawn PF money, then that previous time will not be added to your pension service. Pension service gets connected only when you transfer your PF to the new company. The second condition is related to age. To get full pension, it is mandatory for the employee to be 58 years of age. That is, 10 years of accumulated capital and age of 58, both of these together make you entitled for lifetime pension.
How does the money deducted from salary reach the pension fund?
Often people think that their entire PF deduction is being deposited in their account, but the mathematics is a little different. Of the share deposited by the employer in your PF, 8.33 percent goes into the Employee Pension Scheme (EPS). However, this contribution is not based on your entire salary, but on a salary ceiling set by the government. This is the reason why even the pension of an employee earning lakhs of rupees per month does not go above a limit. This money does not come directly into your hands, rather it is deposited in a pool, which you get back as monthly income after retirement.
Rushing to take pension at the age of 50 will prove costly
The amount of pension also depends on when you start taking it. According to EPFO rules, you can take pension even after the age of 50 years, but it is considered as ‘early pension’. If you start pension at the age of 50, without waiting for 58 years, then the amount you get is reduced every year. This deduction is permanent, meaning you will get less money throughout your life. On the contrary, if you do not take pension even after 58 and postpone till 60 years, you can get increased pension.
If you leave your job before 10 years, will you get money?
There is always a fear in the minds of employed people that if 10 years of service is not completed, will the pension money be lost? The answer is- no. If your total service is less than 10 years, you do not become entitled to monthly pension, but your money remains safe. You can opt for lump sum withdrawal on leaving the job. For this, EPFO uses a special ‘service table’. In this, a factor is decided on the basis of your years of employment and after multiplying it with your salary, a lump sum amount is given.