If you work and have a PF account, then this question must have come to your mind that how much pension will you get after retirement. Especially if you work till the age of 60, then it is important to know what the rules of the Employees Provident Fund Organization (EPFO) say and how pension is calculated. Let’s understand this in simple language.
How is money deposited in PF account?
If you work in the private sector, then 12% of your salary goes to your PF account. Your company also contributes the same amount, but 8.33% of it is deposited in the pension fund and the remaining 3.67% in PF.
What do EPFO’s pension rules say?
According to EPFO, if you have contributed to the PF account for 10 years, then you are entitled to pension.
You can claim pension at the age of 50, but 4% will be deducted every year.
If you wait till the age of 58, you will get full pension.
If you do not claim pension after 58 years and postpone it till 60 years, then there will be an increase of 4% every year, that is, at the age of 60, you will get 8% more pension.
Know the formula for pension calculation
As per the current rules of EPFO, the maximum limit of pensionable salary is Rs 15,000. This means that every month Rs 15,000 x 8.33/100 = Rs 1,250 can be deposited in your pension fund.
When pension is calculated, it is calculated using this formula:
Pensionable salary x Pensionable service / 70 = Monthly pension
How much pension will you get at the age of 60?
If you started working at the age of 23 and retired at the age of 58, then you have worked for a total of 35 years. In this case:
Pensionable salary = Rs 15,000
Service period = 35 years
Pension will be:
15,000 x 35 / 70 = Rs 7,500 per month
If you claim pension at the age of 60, then there will be an additional increase of 8% on it.
Know important things related to pension
The calculation of PF pension is based on your average salary of the last 60 months.
The longer the job tenure, the higher will be your pension.
So if you work for a long time and do not claim pension till the age of 60, then this can prove to be a profitable deal for you. To get answers to questions related to pension, definitely understand the rules of EPFO and keep reviewing your account from time to time.