EPS Booster: How Rs 25,000 EPF Wage Ceiling Limit Increase Your Pension

The Union Cabinet's recent decision to increase the wage limit under the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS) from Rs 15,000 to Rs 25,000 per month will bring nearly 51 lakh more employees–whose basic + HRA ranges between Rs 15,000 and Rs 25,000–under the social security net. It will not only give exposure to EPF, but they will also be contributing to the Employees' Pension Scheme (EPS. 

Under the current structure— EPF salary cap of Rs 15,000—the pension contribution for private sector employees is minimal. However, with the implementation of the new wage ceiling of Rs 25,000, the pension contribution amount will rise by 66.6 per cent. The new proposed wage ceiling will come into effect from October this year. 

Meanwhile, you might be thinking about how it would change the pension amount after 20 years of service. 

EPS Calculation

EPFO's EPS pension formula: Monthly pension = (Pensionable salary × Pensionable service) ÷ 70. The pensionable salary ceiling has increased from Rs 15,000 to Rs 25,000, and 2 bonus service years are added for 20+ years of work.

Under company contributions, 8.33 per cent goes to the EPS fund. With the new Rs 25,000 limit, the monthly deposit increases from Rs 1,250 to Rs 2,088, and 3.67 per cent goes to the EPF Account. 

Also Read: PPF vs SSY Investment Guide: How Rs 60,000 Annual Investment Grows Into Rs 27.7 Lakh

How much pension will you get in 35 years?

Note: The calculation considers two years of bonus service years as it has been added to the pension calculation for those who have worked for more than 20 years.

EPF Amount After 20 Years?

Let’s assume you have a basic salary of Rs 30,000 and you were employed for 20 years. Under the new wage ceiling. Your pension will be Rs 7,142 per month—using the formula 25,000X20/70.