The Employees Provident Fund Organization (EPFO) has recently made changes in the rules of pension calculation, which will benefit millions of employees. This change has been made under the Employees’ Pension Scheme (EPS), which is one of the largest social security programs in India. The purpose of these new rules is to provide better pension to employees on the basis of their service period and salary.
In this article, we will tell you how the new pension calculation works, what are its main features, and how this change can be beneficial for you.
EPFO New Pension Calculation: Main things
| Parameter | Description |
| Name of the scheme | Staff pension scheme (EPS) |
| Implementation institution | Employee Provident Fund Organization (EPFO) |
| Minimum service | 10 years |
| Minimum monthly pension | ₹ 1,000 |
| Proposed minimum pension | ₹ 7,500 (under consideration) |
| Eligibility age | 58 years |
| Contribution rate | 8.33% of employer |
How does a new pension calculation work under EPS?
Some significant changes have been made to make the new pension calculation simple and transparent. Now monthly pension will be calculated from the following formula:
= × 70
,
70
Painful Salary: This is your last 60 months average salary.
Painful service: This is your service period in which you have contributed to EPS.
For example:
If an employee has a penable salary of ₹ 15,000 and has contributed to EPS for 10 years, then he will have a monthly pension:
= 15,000 × 1070 = ₹ 2,143
,
70
15,000 × 10
= ₹ 2,143
The main features of EPS
- Minimum service period: At least 10 years job is necessary to get the benefit of EPS.
- Minimum Monthly Pension: Currently ₹ 1,000 is scheduled, but it is being demanded to increase it to ₹ 7,500.
- Contribution Rate: The employer contributes to 8.33% EPS of your salary.
- Eligibility Age: The employee will get the benefit of pension only after the age of 58 years.
New facilities and changes
1. Centralized pension payment system
Now EPFO has implemented CPPS, causing the pension payment process to be centralized. Its benefits:
- You can get pension in any bank account.
- The payment process will be fast and error-free.
2. High pension option
Employees can now opt for getting more pension based on their actual salary. For this, they have to make additional contribution.
3. Simplified joint declaration process
EPFO has simplified the joint declaration process. From this:
- The process of depositing the document has become easier.
- Claim processing has intensified.
4. Profile update online
Now members can update their profile details like names, date of birth etc. online.
Benefits from new pension scheme
- Better financial security: Regular income is ensured after retirement.
- Simple process: Online services save both time and hard work.
- High Pension Options: Employees can get high pension by contributing more according to their needs.
Difference between EPS and EPF
| Parameter | EPS (Employees Pension Scheme) | EPF |
| Objective | Monthly income after retirement | Saving and earning interest |
| Contribution rate | 8.33% of employer | 12% of both employee and employer |
| withdrawal | Only on retirement | Equivalence possible even after changing jobs |
Questions and answers related to new scheme
Q1: Can all employees choose high pension options?
Yes, but additional contribution will have to be made for this.
Q2: What is CPPS?
It is a centralized system that ensures direct pension payment in all bank accounts.
Q3: Will the minimum monthly pension be increased?
The government is considering increasing it to ₹ 7,500.
conclusion
The new pension calculation system implemented by EPFO can prove to be a major improvement for employees. This will not only improve their retirement plans but will also ensure financial security. However, the minimum pension increase proposed by the government is still under consideration.
Disclaimer:
This article is written only for the purpose of providing information. Please seek official document or specialist advice before any decision.
