In a significant move aimed at enhancing social security, the Employees’ Provident Fund Organisation (EPFO) has announced a major change in the pension benefits for its members. The organization has revised its pension calculation formula, allowing individuals who have worked for just 10 years under the EPFO scheme to now receive a minimum monthly pension. This step is seen as a game-changer, especially for those in unorganized or semi-formal sectors with short employment durations.
What Is EPFO and How Does EPS Work?
The EPFO is a statutory body under the Ministry of Labour and Employment, Government of India, which manages provident fund and pension schemes for the workforce in India. One of the key schemes it administers is the Employees’ Pension Scheme (EPS) 1995, under which members are eligible for monthly pensions post-retirement if they have contributed for at least 10 years.
Previously, while completing 10 years of service made one eligible for pension, the actual amount was minimal often too little to rely on. However, this new announcement aims to boost the monthly pension payout, even for those who’ve only worked for 10 years.
What Has EPFO Announced?
As per the latest announcement:
- Individuals who have worked and contributed to EPS for at least 10 years are now guaranteed a minimum monthly pension of ₹1,000.
- This move is in line with the Supreme Court’s directive and long-standing demands from labour unions and policy advocates.
- The central government will continue to subsidize this pension, ensuring sustainability and wider coverage.
How Much Pension Will You Receive?
The exact amount of pension depends on several factors:
- Pensionable Salary: Calculated as the average salary during the last 60 months of service.
- Pensionable Service: The total number of years you contributed to the EPS.
The formula used is:
Monthly Pension = (Pensionable Salary x Pensionable Service) / 70
Example Calculation
Let’s say:
- Pensionable Salary = ₹15,000
- Pensionable Service = 10 years
Pension = (15,000 x 10) / 70 = ₹2,142.86/month
In this case, you’d receive over ₹2,100 monthly, which is more than double the previously assumed minimum. However, those with a lower salary or shorter tenure will still receive a minimum of ₹1,000/month, thanks to the latest decision.
Who Benefits the Most?
This change benefits:
- Contract and temporary workers who change jobs frequently and often fail to complete long continuous service.
- Women workers, who may exit the workforce due to personal or family commitments.
- Retired individuals with shorter contribution periods but who earlier received little or no pension.
Other Key Highlights
- No Need to Work 20+ Years: Earlier, most meaningful pensions were possible only after 20+ years of service.
- Universal Minimum Guarantee: Ensures financial dignity for all retirees.
- Digital Tracking: EPFO now allows easier tracking of service history via UAN, even if you worked in multiple companies.
How to Claim Your EPS Pension After 10 Years?
To claim pension after 10 years of service:
- Ensure your UAN is active and linked to Aadhaar.
- Submit Form 10D via the EPFO member portal.
- Choose ‘Pension on Superannuation’ when filing online.
- Ensure your bank account and nominee details are updated.
What About Those Who’ve Worked More Than 10 Years?
If you’ve worked for more than 10 years, your pension will be proportionally higher, depending on your salary and years of service. EPFO also plans to revisit the upper limits and consider allowing higher contributions for enhanced future pensions.
Final Thoughts
The EPFO’s new pension guidelines offer hope, stability, and dignity to millions of workers who contribute to the formal economy. With clearer eligibility norms and a guaranteed pension slab, India’s workforce can now look forward to retirement with financial assurance, even with only a decade of service.