To continue income after retirement, private job holders invest in EPFO. After investing in EPFO, one gets the benefit of a lump sum amount and a monthly pension on maturity. A question remains in the mind of EPFO users how much pension they will get after retirement? We will tell you a formula through which you can easily calculate your pension.
What is the formula for calculating pension
Let us tell you that the benefit of a pension in EPFO is available when you contribute to EPFO continuously for 10 years. At the same time, 35 years of service is necessary for a pension. The formula to calculate pension is (average salary x pensionable service / 70).
The average salary includes your basic salary and dearness allowance.
Pensionable service is how many years you have worked.
For example, if your basic salary is Rs 15,000 and you work for 35 years, then you can calculate your pension using the formula. According to the formula, you will get a monthly pension of 15000 x35 / 70 = Rs 7,500. You can calculate the pension by applying this formula.
This formula for calculating pension is for employees of the organized sector after 15 November 1995. The rules for employees before this are different.
You can get a pension before retirement.
EPFO also provides the facility of early pension. Although the user gets the benefit of a pension after 58 years. The option of early pension can be selected at the age of 50. However, there is a deduction of 4 percent every year. For example, if you select the option of early pension at the age of 56, then after a deduction of 4 percent, you will get only 92 percent of the basic amount as a pension.
How much contribution has to be made to EPFO
12 percent of the basic salary has to be deposited in EPFO every month. In this, the company also contributes along with the employee. The government gives interest on the amount deposited in the EPFO fund. After retirement, 75% of the amount deposited in this fund is received as a lump sum, and 25% is received every month as a pension.
