Your EPF pension decoded: Here’s what you must know about eligibility and benefits

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Among the most reliable retirement benefits for salaried people in India is the Employees' Pension Scheme under the Employees' Provident Fund. The majority have known EPF as a savings plan, but not all are aware of the way it works in relation to pension. Each month, as you and your employer make contributions into your EPF account, a certain part of your employer's contribution—8.33 percent of your salary up to Rs 15,000—is transferred to the EPS. Over time, this builds a corpus for your retirement and provides you with a stream of income over your retirement years. EPS is managed by the Employees' Provident Fund Organisation to ensure that the pension funds remain safe and transparent.

Eligibility criteria to keep in mind

The eligibility to draw the pension under EPS will accrue only after completion of at least ten years of service and attainment of 58 years of age. You are also entitled to draw a reduced pension on attaining 50 years, though it will be less than the actual amount. In case you leave the job before ten years, no monthly pension will be paid, and you are eligible to withdraw the accumulated EPS amount in your account, as per rules framed by EPFO.

How your pension amount is calculated

The amount of pension is not the same for everybody; it depends on your pensionable salary and years of service. The usual formula applied is: Pension = (Pensionable Salary × Pensionable Service) ÷ 70. Pensionable salary is the average of your last 60 months’ basic pay, and pensionable service means the number of years you have worked in an EPF-registered organization. Longer the service and higher your salary, the better will be your pension.

Family pension and other benefits

Also, in the case of the death of a member, EPS extends financial assistance to the family in the form of a family pension. A fixed monthly pension is granted to the spouse and eligible children, securing their position of financial security. Further, a widow pension and child pension have also been provided, further expanding the social security net for dependants.

Why the EPF pension remains a key retirement safety net

Even as many other avenues of private investment are emerging, the EPF pension remains a mainstay for the retirement financial planning of millions of salaried people. Assured returns, lifelong pension, and government-backed security make it one of the safest post-retirement sources of income. If you are an EPF contributor, understanding how EPS works will facilitate better retirement planning. It's not just a deduction from your salary, it's your future financial cushion, silently growing in the background.