Will you get higher EPS pension if retiring soon?

The Employees’ Provident Fund (EPF) wage ceiling has been raised from Rs 15,000 to Rs 25,000, effective immediately. This change has prompted many Employees’ Pension Scheme (EPS) members to question how their monthly pension will change. The biggest beneficiaries will be employees with five years or more of pensionable service under the Rs 25,000 ceiling.

Pension is based on the average 60-month salary drawn until retirement. Employees with less than five years of service will only receive a partial benefit from the increased EPS pension.

To illustrate, consider an employee with three years left in retirement and a monthly average salary of Rs 15,000 or above for the last two years. Their pensionable salary will be Rs 15,000 for those 24 months. If they earn Rs 25,000 or above for the next three years, the pensionable salary for those 36 months will be Rs 25,000. The 60-month average salary for their EPS pension calculation will then be Rs 21,000.

Now, let's compare this to an employee with 30 years of pensionable service and five years left to retire, earning a monthly salary of Rs 25,000 or above during that time. Their estimated monthly EPS pension will be Rs 11,429, which is Rs 1,829 more than the previous employee with the same pensionable service but a lower pensionable salary.

The pensionable salary is calculated as the average salary of the last 60 months. The pension is then determined by multiplying this average salary by the pensionable service years divided by 70. Pensionable service years are calculated by adding two years for every 20 years of service, up to a maximum of 32 years.

In summary, the higher wage ceiling means that employees with five years or more of pensionable service and a salary of Rs 25,000 or above will receive a higher estimated monthly EPS pension. Those with less than five years of service will only see a partial benefit from the increased pension.