EPS pension after ₹25,000 wage ceiling hike: Who can get ₹12,500 monthly? Check out the calculations
The Employees’ Pension Scheme (EPS) has now become more meaningful for salaried employees after the EPFO wage ceiling for mandatory coverage was raised from ₹15,000 to ₹25,000.
The higher ceiling can help increase the salary utilised in calculating retirement benefits, but the full benefit will ultimately depend on an employee’s pensionable service and on how long they contribute under the revised ceiling.
Under the EPS formula, the monthly pension is calculated as:
Pension = Pensionable salary × Pensionable service ÷ 70
Furthermore, as a matter of rule, pensionable salary is generally also based on the average salary during the last 60 months before retirement or exit, subject to the applicable rules and ceiling.
Can you get a ₹12,500 monthly EPS pension?
An employee can receive an estimated ₹12,500 monthly EPS pension if the pensionable salary is ₹25,000 and the pensionable service, after including the applicable two-year service bonus upon completion of 20 years, amounts to 35 years.
For example, with 33 years of actual pensionable service, the 2-year bonus can take the calculations to 35 years and applying the above formula will bring:
|
Pensionable salary |
Service used for calculation |
Estimated monthly EPS pension |
|---|---|---|
| ₹15,000 | 35 years | ₹7,500 |
| ₹25,000 | 35 years | ₹12,500 |
Note: These figures are illustrative. The actual pension depends on the employee’s service record and the applicable rules.
It is also essential to keep in mind that simply having a basic salary of ₹25,000 does not automatically guarantee a ₹12,500 pension. The employee is mandated to have sufficient pensionable service and the relevant contributions under the new ceiling.
What does the higher ceiling mean for employees?
To explain this simply, the higher ceiling also results in increasing the amount that will be considered for EPS contributions. In the earlier ₹15,000, the employer’s EPS contribution was capped at ₹1250, i.e., 8.33% of the old wage ceiling; this contribution will rise to about ₹2,083 a month with the ₹25,000 ceiling. Holistically, such a move will boost the pension savings of working employees.
Therefore, employees joining EPS under the revised rules can include those earning basic pay above ₹15,000 and up to ₹25,000, subject to the scheme’s conditions.
Still, employees who are retiring within the next 5 years might end up receiving only a partial benefit from the higher ceiling because the benefit depends on the period for which contributions are made at the revised ceiling.
10 years of minimum service needed to qualify for pensionable service
To qualify for the EPS pension, an employee must have at least 10 years of pensionable service. Once an individual is eligible, the scheme provides a minimum monthly pension of ₹1000, while the actual pension depends on the pensionable salary service.
Hence, the ₹25,000 ceiling creates scope for a higher EPS pension; still, the ₹12,500 figures should be viewed as an illustrative outcome, not a guaranteed or assured pension for every employee. To secure such a pension, several other critical criteria must be met, including a minimum service duration and the relevant contribution within the new ceiling.
Disclaimer: The pension figures mentioned are illustrative calculations based on the stated assumptions and should not be treated as assured benefits. Actual EPS pension may vary depending on an individual’s pensionable salary, service record, contributions and applicable EPFO rules. Readers should verify their eligibility and pension entitlement with EPFO.
