EPFO: How much pension will private employees retiring in 2025 receive? Here's how to calculate it

EPFO: Millions of private sector employees often have one question and fear—old age security. Unlike government jobs, there's no fixed pension, making it natural to worry about the future. 

However, if you're a member of the Employees' Provident Fund Organization (EPFO) and your PF is deducted, there's no need to despair. 

The EPFO's EPS scheme is a boon for private employees. If you're planning to retire in 2025 or later, it's crucial to know how much monthly income you'll receive upon retirement.

The money deducted from salary becomes the support in old age.

First, it's important to understand the process of how this post-retirement money is deposited. When PF money is deducted from your salary every month, you might think it's just a savings. 

In reality, a portion of the salary deducted is deposited into your Provident Fund (EPF), while the other portion is contributed by your company. A significant portion of the company's contribution goes directly to the Employees' Pension Scheme (EPS).

This is the accumulated capital that gradually accumulates during employment and later becomes a pension. However, the EPFO ​​has set certain conditions for availing this benefit. 

To be eligible for the pension, an employee must have completed at least 10 years of service (pensionable service). Generally, the full pension is paid at the age of 58, but if necessary, there is an option to receive a reduced pension.

View passbook and calculate the amount in minutes

You can calculate your pension yourself using the formula established by the EPFO: (Pensionable Salary × Total Years of Service) / 70.

There's a very important point to note here that's often overlooked. The maximum salary limit for calculating your pension (Basic Salary + DA) is considered to be ₹15,000 per month. 

This means that even if your basic salary is in the lakhs, your pension will be calculated based on ₹15,000. "Years of service" refers to the total number of years you've contributed to your EPS account.

How much money will you earn when you retire in 2025?

Let's understand this entire math with a simple example. Suppose an employee named Kanhaiya is due to retire in 2025. For example, let's assume that his total service or contribution period to EPS by that time is 50 years (this is a maximum example). 

Since the maximum salary limit for calculating pension is fixed at ₹15,000, Kanhaiya's pension will be calculated as follows: ₹15,000 (salary) × 50 (years) ÷ 70 = ₹10,714 (approximately).

According to this calculation, Kanhaiya will receive a monthly pension of approximately ₹10,714 after retirement. However, there's a catch. If Kanhaiya doesn't wait until he reaches 58 and starts receiving his pension at 50, he will suffer a loss. 

According to the rules, he will receive a 4% lower pension each year. However, if he postpones his retirement until 60 instead of 58, his pension amount will increase.