EPS Pension Benefits: Know How You Can Secure Maximum Monthly Pension Of Rs 7,500 After Retirement

For millions of salaried employees in India’s organised sector, retirement planning often centres around the Employees’ Pension Scheme (EPS). Introduced in 1995, EPS is linked to the Employees’ Provident Fund Organisation (EPFO) and provides a pension to members once they meet certain eligibility conditions. According to experts, understanding how contributions are split, the eligibility rules, and the calculation process is essential for employees aiming to secure steady income in their later years.

Contribution Towards EPS

Under the current rules, both employer and employee contribute 12 per cent of the employee’s basic salary towards the Employees’ Provident Fund (EPF). Out of this contribution, 8.33 per cent is earmarked for the Employees’ Pension Scheme, while the remaining 3.67 per cent is credited to the employee’s provident fund account. Importantly, while EPF balances earn interest at prevailing rates, EPS balances do not accumulate interest.

Eligibility to Avail EPS Pension

To qualify for pension benefits under EPS, members must satisfy specific conditions. They should be registered under EPFO, have completed a minimum of 10 years of service, and must reach the retirement age of 58 years. However, according to financial planners, the scheme does allow early pension withdrawals from the age of 50, though at a reduced rate. Members also have the option of deferring their pension up to the age of 60, in which case an additional 4 per cent is added for each year of deferment.

Minimum and Maximum Pension Benefits

The minimum pension payable under EPS is ₹1,000 per month. On the upper end, the pension is capped due to a maximum pensionable salary of ₹15,000 per month. This means that even if an employee earns a higher basic salary, contributions beyond this limit do not add to EPS. As a result, the highest possible contribution to EPS is ₹1,250 per month. With service years capped at 35 for pension calculation, the maximum pension a member can receive is ₹7,500 per month.

How EPS Pension Is Calculated

EPS benefits are computed using a standardised formula:

Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Here, the pensionable salary is fixed at ₹15,000, and pensionable service refers to the total number of contributory years, with a maximum of 35 years. For instance, an employee with 25 years of service would receive around ₹5,357 as a monthly pension, while someone completing 35 years of service would qualify for ₹7,500.

Practical Example of EPS Contribution

To illustrate, consider an employee whose combined basic salary and dearness allowance amount to ₹6,000. Even though 8.33 per cent of this works out to ₹500, EPS rules restrict the contribution to ₹1,250 per month. Thus, the surplus amount flows into the EPF account, which continues to earn interest. This distinction is crucial, as many employees assume their pension will grow with higher contributions, when in reality EPS has a fixed upper limit.

Why EPS Matters for Retirement Planning

Despite its cap on benefits, EPS remains a significant support for employees in the organised sector. According to experts, the scheme is particularly valuable for individuals who may not have substantial private investments or who rely on employer-linked retirement benefits. However, employees should be aware of its limitations and plan additional investments in mutual funds, insurance products or pension plans to ensure adequate financial security post-retirement.

The Employees’ Pension Scheme provides a reliable safety net for employees, but the benefits are subject to fixed ceilings on salary and service years. For those relying solely on EPS, the maximum monthly pension of ₹7,500 may not be sufficient to cover all retirement expenses. Therefore, experts suggest viewing EPS as a foundation and complementing it with other long-term investment strategies for a more comfortable and financially secure retirement.

Disclaimer: This article is for information purposes only and should not be treated as financial advice. Readers are encouraged to consult certified financial advisors or retirement planning experts before making decisions.