There has been a lot of discussion about pension (EPS) for some time now. A big bench of the Supreme Court is hearing about its upper limit. It is expected that the pension limit may increase.
Employee Pension Scheme: Provident fund is a great saving scheme for those working in the private sector. Apart from tax rebate, good returns and large corpus for retirement are associated with its benefits. It is called retirement fund because some part is deducted from the employee’s salary during the job and some part is deposited in the provident fund and some part is deposited in the pension fund. Employees get the entire PF amount in lump sum at the age of 58. But, the pension amount is fixed on a monthly basis. There is a formula to decide the EPS pension.
EPS is part of your salary
Like EPF, EPS is also a part of the employee’s salary. In EPS, a minimum of Rs 1,000 to Rs 7,500 is available as pension every month. However, most of the people do not know how to calculate the Employee Pension Scheme.
EPS Formula
12 percent of the basic salary of the employee is deposited in the PF account. The contribution of the employer is also the same. But, a part of the contribution of the employer is deposited in the EPS ie Pension Fund. The contribution of basic salary is 8.33% in EPS. However, the maximum limit of pensionable salary is Rs 15,000. In such a situation, only a maximum of Rs 1250 can be deposited in the pension fund every month.
Pension is available up to Rs 7500
According to the existing rules, if the basic salary of an employee is Rs 15,000 or more, then Rs 1250 will be deposited in the pension fund. If the basic salary is 10 thousand rupees, then the contribution will be only 833 rupees. The calculation of pension on the retirement of the employee is also considered as the maximum salary of 15 thousand rupees (EPS upper limit). In such a situation, after retirement, employees can get only Rs 7,500 as pension under EPS rule.
How is EPS Calculation done?
- Formula for EPS Calculation = Monthly Pension = (Pensionable Salary x Number of Years Contribution in EPS Account)/70.
- If someone’s monthly salary (average of last 5 years salary) is Rs 15,000 and the duration of the job is 30 years, then he will get a pension of only Rs 6,828 per month.
- During the service history, the entire amount deposited under the Employee Pension Scheme is deposited with the government. Its benefit is available on retirement.
How much pension will you get if the limit is removed?
If the limit of 15 thousand (EPS upper limit) is removed and your salary is 30 thousand, then the pension you will get according to the formula will be this. (30,000X30)/70 = Rs 12,857
What are the conditions for EPS
Some conditions have been fixed by the EPFO for EPS. It is necessary to be an EPF member for the first pension. It is also mandatory to be in the job for at least 10 regular years. Only then will you be entitled to pension. Pension is available at the age of 58. However, there is an option to take pension after the age of 50 and even before the age of 58. On taking the first pension, you will get the reduced pension. For this, Form 10D has to be filled. On the death of the employee, the family gets pension. If the service history is less than 10 years, then they will get the option to withdraw the pension amount at the age of 58 years.
