How is pension under Employees Provident Pension Scheme is calculated?

The formula for the calculation of Monthly pension = (Pensionable salary X Pensionable service) ÷ 70
The amount of pension will be calculated as per the above formula. The average salary (Basic) of the last year of service multiplied by the number of years of service divided by 70. Remember your employer shows your salary as Rs. 6,500 for EPS, so the pension is calculated on a monthly salary of Rs. 6,500. So if you have worked for say 35 years, your monthly pension will come to Rs. 3250 [(Rs. 6,500 X 35 years)] ÷ 70 according to the formula. Thus, the maximum pension per month is subject to a maximum of Rs. 3,250 per month.

EPF pension scheme is linked to the Employee Provident Fund (EPF). Let us understand the subtle difference between the EPF fund and EPF pension scheme.

Every month some amount is deducted from the employees salary as contribution to the EPF fund and on this Govt adds its contribution and pays interest also and at the time of retirement this accumulated fund is given to the employee. So this is the corpus generally called as PF fund.

Now every month a small amount (8.33%) from this monthly PF contribution goes to EPF pension fund. This amount will be deposited in the EPF pension fund and at the time of attaining an age of 58 the subscriber will not get this amount back but will get a EPF pension against it and for that there is a fixed formula ( 6500 x service years / 70) to calculate the maximum pension admissible. If this amount is less than Rs 1000 then Govt will give Rs 1000 per month as minimum assured pension.

If you are interested to find out the further details of the EPF pension scheme then you can get valuable information in the Govt site www.epfindia.gov.in