Will Every Subscriber Contributing to PF Receive a Pension? Know These Essential Rules

EPFO EPS Rules: Does every employee who contributes to PF receive a pension? Learn about these crucial rules related to EPS, the eligibility criteria, and a simple method to calculate your pension.

EPFO EPS Rules: For salaried individuals, managing post-retirement expenses is often a major concern. To alleviate this worry, the government administers the Employees’ Pension Scheme (EPS) through the EPFO. People commonly assume that contributing to PF (Provident Fund) is solely about accumulating a lump-sum corpus; however, it also paves the way for receiving a monthly pension. Let’s understand, in simple terms, how this scheme operates and what its rules are.

What is EPS, and Who Contributes to It?

When you are employed, 12% of your basic salary and Dearness Allowance (DA) is deposited into your PF account. Your employer contributes an equal amount (12%) from their side. However, here lies the twist: out of this 12% employer contribution, 8.33% is transferred to your pension—specifically, your EPS account—while the remaining 3.67% goes into your PF account. In other words, you do not need to contribute anything extra from your own pocket specifically for the pension.

What Are the Eligibility Criteria for Receiving a Pension?

Not every PF account holder receives a pension after retirement. The EPFO ​​has established specific, straightforward rules for this:

10 Years of Service: To become eligible for a pension, you must have completed at least 10 years of service. The good news is that this service need not be continuous; you can fulfill the total requirement of 10 years even by switching jobs.

Age Criterion: The benefit of a regular (full) pension becomes available only after you have crossed the age of 58.

Option for Early Pension: If you wish, you can opt to start receiving your pension even after the age of 50 (provided you have completed 10 years of service); however, in such a scenario, you will receive a slightly reduced pension amount.

Minimum Pension Amount: According to the rules, a minimum monthly pension of ₹1,000 is mandated under this scheme.

If you commenced employment after September 1, 2014, and your basic salary at the time of joining exceeded ₹15,000, you will not fall under the purview of the EPS (Employees’ Pension Scheme). In such a situation, the employer’s entire contribution—amounting to 12%—will be credited solely to your PF (EPF) account.

How ​​to Withdraw Funds Upon Leaving a Job?

The rules governing the withdrawal or claiming of pension funds depend on the duration of your service:

Service of Less Than 10 Years: If your total service tenure exceeds 6 months but is less than 10 years, you are eligible to withdraw the entire pension accumulation as a lump sum. To do so, you must fill out Form 10C.

Service of 10 Years or More: In this scenario, you cannot make an interim withdrawal of funds. Instead, you will receive a monthly pension allowance starting from the age of 58. For this purpose, you are required to submit Form 10D.

How ​​is the Pension Calculated?

The amount of your monthly pension is determined based on your ‘Pensionable Salary’ (capped at a maximum of ₹15,000) and your ‘Pensionable Service’ tenure. The direct formula for this calculation is as follows:

Monthly Pension = (Pensionable Salary × Pensionable Service) / 70

For instance, if an employee’s pensionable salary is ₹15,000 and they have completed 25 years of service, then—according to this formula—their monthly pension would amount to approximately ₹5,357. You can view your accumulated EPS balance, which is credited on a monthly basis, by checking the final column of your EPF e-Passbook.