EPS Pension May Rise 67%, Here's Who Will Gain From Rs 25,000 Wage Ceiling?

Mumbai: The Union Cabinet has approved an increase in the monthly wage ceiling for mandatory Employees Provident Fund coverage to Rs 25,000 from Rs 15,000, potentially lifting pension payouts under the Employees’ Pension Scheme by 67 percent for eligible workers.

The decision, announced by Union Minister Ashwini Vaishnaw, is expected to cost the government Rs 11,339 crore annually. The previous ceiling had remained unchanged since September 1, 2014.

The measure will widen social-security coverage across the organised workforce.

Who Will Be Covered?

Employees earning basic pay plus dearness allowance of up to Rs 25,000 a month will now be required to join the EPF and EPS. Previously, employees joining from September 1, 2014, with wages above Rs 15,000 were generally excluded from mandatory EPS membership.

Workers must complete at least 10 years of eligible service to receive an EPS pension. The higher benefit will also depend on how long an employee remains covered under the revised ceiling.

Five-Year Condition

Pensionable salary is based on the average basic pay and dearness allowance earned during the final 60 months before leaving the pension fund. Consequently, the full Rs 25,000 ceiling would apply only after an employee completes five years under the revised limit.

Those retiring earlier may receive a lower pensionable salary because the 60-month average would include months covered by the earlier Rs 15,000 ceiling.

How Pension Is Calculated?

The monthly EPS pension is calculated by multiplying pensionable salary by pensionable service and dividing the result by 70.

At 10 years of service, the estimated pension rises to Rs 3,571 from Rs 2,143. At 15 years, it increases to Rs 5,357 from Rs 3,214.

EPFO rules grant a two-year service bonus to members completing at least 20 years. Therefore, 20 years is counted as 22, lifting the estimated pension to Rs 7,857 from Rs 4,714.

For 25 years, counted as 27, the pension could rise to Rs 9,643 from Rs 5,786. At 30 years, counted as 32, it may increase to Rs 11,429 from Rs 6,857—a monthly gain of Rs 4,571.