Pension is an important financial security that keeps the person financially stable after retirement. The scheme is available to both government and private employees, and its purpose is to meet the retirement needs. In this article, we will understand various aspects of pension calculation in detail, such as pension formula, eligibility criteria, and how it is fixed.
What is pension?
Pension is a regular income that a person gets after retirement. This scheme is mainly for those who have worked in an organization, government department or private company during their tenure. The purpose of pension is to provide financial assistance in old age and maintain a standard of living.
Pension calculation method
Many factors are involved to calculate pension, such as the year of service, pensionable salary, and average monthly salary. The general formula of pension calculation below is given:
Pension Formula:
= (70) ×
,
70
)
- Pensionable Salary: It is an average basic salary + DA (dearness allowance) of the last 12 months.
- Years of service: How many years the person did a job, it is counted in years of service.
Example of pension calculation
Suppose an employee’s pensionable salary is ₹ 30,000 and has completed 20 years of service.
Calculation:
= (30,00070) × 20 = .4 8571.43
,
70
30,000
) × 20 = .4 8571.43
Thus, the employee will get a pension of ₹ 8571.43 every month.
Overview of pension scheme
| Description | Acquaintance |
| Name of the scheme | Staff pension scheme (EPS) |
| Applied date | 16 November 1995 |
| Minimum service | 10 years |
| Maximum service period | 35 years |
| Minimum pension amount | ₹ 1,000 per month |
| Maximum pensionable pay | ₹ 15,000 per month |
| Eligibility age | 58 years |
Pension Calculation under Employees Pension Scheme (EPS)
The EPS scheme is run by the Government of India. Under this scheme, employees get monthly pension after retirement. EPS calculation is done in the following way:
- Pensionable Salary: Average salary of last 60 months.
- Painful service: Number of total years of service.
EPS Formula:
= (× 70)
,
70
,
Other important points
- If the employee has served less than 10 years, he will only be eligible for withdrawal benefits.
- If the employee has served more than 20 years, he gets the benefit of additional 2 years of service.
- The EPS account is contributed by the employer, which is 8.33% of the total EPF contribution.
Family pension and other benefits
If the employee dies, his family gets a family pension. In addition, other benefits include:
- Enhanced Family Pension: It is given for the first 7 years of the employee’s death or till the age of 67 (whichever is earlier).
- Ordinary Family Pension: This enhanced pension is given after the end.
National pension system)
NPS is a modern retirement scheme in which a person contributes himself. Investors get two types of pension in NPS:
- Annuity Plan: Provides monthly income.
- Lump Sama Amount: Provides a lump sum amount.
By using NPS calculator, you can detect your estimated monthly pension and retirement corpus.
Calculating pension by online tools
Nowadays there are many online tools available which help in calculating your estimated pension amount. In these tools you have to fill the following information:
- Your age
- Retirement age
- Current pay
- Contribution
Disclaimer:
This article is written only for the purpose of providing information. The real pension amount depends on the rules set by your organization or government. Please contact the concerned department to know your exact situation.
