The Employees’ Pension Scheme (EPS-95) provides a monthly pension benefit after retirement, calculated using the employee’s pensionable salary and years of service. Importantly, the pensionable salary used in the calculation is capped at ₹15,000 per month unless the employee opts for the higher pension scheme based on actual salary.
Also read: When do employees get full EPF pension benefits?
Standard EPS Pension Calculation
If you have not applied for the higher pension option, your pension is calculated using the capped pensionable salary of ₹15,000 per month, regardless of your actual salary. For example, with 30 years of service: Monthly Pension= ₹15,000×30/70= ₹6,428 per month.
The maximum pension under the standard rule with full 35 years of service is ₹7,500 per month. Notably, the minimum guaranteed pension amount was increased to ₹7,500 per month plus Dearness Allowance starting May 2025, ensuring a basic pension floor even if the calculation produces a lower amount.
Higher Pension Scheme
Employees who opted for the higher pension scheme (via joint application with the employer before the deadline) can calculate their pension using their actual average salary from the last 60 months of service. For example, with a ₹20,000 average pensionable salary and 30 years of service: Monthly Pension= ₹20,000×30/70= ₹8,571 per month.
Also read: What is the formula for calculating EPF pension?
Under this scheme, the pensionable salary reflects true earnings, potentially leading to higher monthly pension amounts. However, the employee’s EPF contributions reflect this higher calculation, and opting for this scheme reduces the lump sum EPF payout on retirement. The higher pension is taxable income, unlike the tax-exempt lump sum amount from the EPF corpus.
Summary
The EPS-95 pension calculation fundamentally depends on whether an employee has chosen the standard capped pension or the higher pension scheme. The formula remains: Monthly Pension= Pensionable Salary× Pensionable Service/70
With a capped salary limit of ₹15,000 or actual salary under the higher pension scheme. The recent increase in minimum pension benefits protects retirees with lower calculations, ensuring adequate post-retirement income support.
Also read: What is EPF Pension Scheme 1995?
