How Much Pension Will You Get from Your PF Account After 60
Do you have a PF account as an employee? And are you curious about how much
pension you would accumulate in this PF account after retirement? Well, theThe
Employee Provident Fund Organization (EPFO) has devised certain rules regarding
eligibility and methods of calculation for pension. Understanding these will save you
a lot of hassle in future planning.
Through this article, we will try to explain EPFO pensions in fairly simple terms along
with contribution calculations as well as the amount you may expect to have at
retirement age of 60.
What is the EPFO Pension Scheme?
The EPFO pension scheme, also known as the Employee Pension Scheme (EPS),
is a retirement benefit that employees receive in India. This ensures that upon
retirement, the employees shall receive a pension under the defined conditions.
Who Can Claim EPFO Pension?
In order to receive an EPFO pension, the person needs to:
1. Contribute in EPF (Employees’ Provident Fund) for ten years without break,
2. Complete age of fifty years for reduced pension, or at fifty-eight years for full
pension,
3. Post 60 years to avail those other pension benefits.
If one contributes less than ten years, he is not eligible under the pension scheme
but can withdraw his total accumulated amount.
How is Money Deposited into Your PF Account?
Every month both you and your employer contribute 12% of your basic salary and
dearness allowance (DA) to your EPF account. However, this contribution is split in
the following way:
Your contribution: 12% goes directly into the EPF.
Your employer’s contribution: 8.33% goes into the EPS (pension fund), and 3.67%
goes into the EPF.
For example, if your basic salary is ₹15,000, then the contributions made by your
employer toward a pension fund would be:
₹15,000 × 8.33% = ₹1,250 per month.
Every month, this amount is deposited into your pension fund till your retirement.
EPFO Pension Laws and Retirement Age
1. Early Pension at 50 Years
If one wants to draw his pension at 50 years, one gets a lower amount.
Pension is reduced by 4% for each year for the period before 58.
2. Full Pension at 58 Years
In other words, on waiting until reaching 58 years, you become entitled to the full
pension.
3. Extra Benefit at 60 Years
Thus, if one delays till the age of 60 years, the withdrawal from one’s pension
account, an 8 % increase takes place in the monthly pension.
This is added because EPFO adds an increment of 4% per year after 58 years.
Thus, waiting until 60 would help because it can offer a greater amount in the end for
the pension.
How is your Pension Calculated?
The very simple formula that EPFO uses for the calculation of the pension is:
Pensionable Salary × Years of Service / 70 = Monthly Pension
Here,
Pensionable Salary = Average of last 60 months’ basic salary (maximum limit
₹15,000).
Years of Service = Total years you have worked and contributed to EPFO.
How much will your pension be at 60?
We will take an example to explain this better:
Assuming a person started at 23 years of age and happily retired at 58 years of age.
The total service period = 35 years.
Pensionable salary (average salary of the last 60 months) = ₹15,000
Now comes the formula:
₹15,000 × 35 / 70 = ₹7,500/months.
However, if you wait until the age of 60 to claim your pension, you get an additional
8% increase in your pension amounting to ₹8,100/month.
Key Takeaways
To qualify for an EPFO pension, you must contribute for a minimum of 10 years.
If a member withdraws their pension between the ages of 50 and 58 deductions are
paid.
Waiting until 60 results in an increase of 8% in your pension.
The pension is based on salary for the last 60 months.
Conclusion
Retirement planning is important for any person; hence, knowing how EPFO pensions
work will provide you with a way to go about it. Contributing regularly to your PF account
and waiting until 60 to claim your pension will give you added advantages for your
monthly pension.
Do check your EPF passbook online or explore more information on the EPFO
website in case of any queries. Make well-informed decisions today and secure your
tomorrow!
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