Last Updated on February 6, 2023 at 4:59 pm
This article explains how to calculate the revised EPS pension assuming the contribution is 8.33% of their basic + DA. After the recent supreme court ruling on the Employee Pension Scheme (EPS), EPFO subscribers, as of 1st Sep 2014, can retrospectively contribute 8.33% of their basic + DA to the EPS via a deduction from the EPF. The option to do this has been opened only to a section of employees and is expected to be expanded soon.
EPS Pension Amount = (Pensionable Salary * Service Period)/70
Pensionable salary = average of last 60 months’ EPS contributions from the date of retirement.
Earlier, the pensionable salary could never be higher than Rs. 6,500 or Rs. 15,000
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EPS contributions can now be 8.33% of an employee’s basic salary + DA. Note: Only employees who joined before 1st September 2014 are eligible for this. Those who joined the EPF after 1st Sep. 2014 are not part of the EPS.
The pensionable salary is still defined as the average of the last 60 months’ EPS contributions from the retirement date. Just that now the EPS contribution will be higher.
Note: Some readers have informed us that the pensionable salary is defined as the average of the last 60 months’ salary, not EPS contributions. If this is the case, the illustration below must be changed accordingly. It seems unfathomable to us that the EPFO would be ready to part with such a high pension to all eligible employees. This is because the annualised rate of return of such a pension (based on average salary) would be significantly higher than the EPF interest rate offer and would plunge the EPFO into even greater financial stress than it is today.
Pensionable service is the total number of years in service (the actual calculation would convert this into days). If a person has completed 20 years of service, two years would be added as a bonus to the pensionable service.
An illustration is shown below by computing the pensionable salary as the annual average of the last five years (instead of the average monthly over the last 60 months)
![Revised EPS pension illustration Revised EPS pension illustration](https://freefincal.com/wp-content/uploads/2023/01/Revised-EPS-pension-illustration-2.jpg)
The salary is assumed to increase yearly by 10%, and the service is assumed to be 20 years (so 20+2 is used in the calculation). The revised EPS pension has now doubled.
Is it worth opting for this revised EPS pension by deducting retrospective higher EPS contributions from the EPF and shifting it to the EPS? We discuss this here: Should I opt for a higher EPS pension by contributing a lump sum?
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