EPS Pension Calculator 2019 (Revised): How much will my EPS Pension increase?

Idea concept featured image

Published: November 30, 2017 at 9:08 am

Last Updated on January 27, 2023 at 8:11 pm

Find out how much your EPS pension will increase with this Excel calculator if you contribute 8.33% of your full salary (basic +DA) instead of Rs. 1250 per month which is 8.33% of Rs. 15,000 the current salary ceiling mandated by the EPFO. Last week, a 1200%  hike in pension for Mr. Praveen Kohli following an October 2016 Supreme court judgement raised eyebrows. When I suggested not to increase EPS Contributions for higher Pension as it may mess up your retirement, many readers promptly ignored it and wanted to know if they are eligible for the pension increase and how much would their revised EPS pension be.

Although I do not recommend it, I am happy to provide details about the revised EPS pension. First of all, you need to be a member of the EPS to be eligible for a revised pension. This means that if you are retired and only contributed up to Rs. 1250 per month in the EPS, it is unlikely that will be going to get a revised pension. Simply because you are not eligible for it as you are no longer a part of EPS and there is no employer involved.

What is the proof? This EPFO circular makes it quite clear that if you did not contribute more than Rs. 1250 a month, there is no question of getting a revised EPS pension. This may be an interim decision, but please recognise even if allowed, you will have to pay a substantial sum to the EPFO to get this pension. It may be a good deal for you, but it is a terrible deal for them. Precisely the reason, they are unlikely to allow.

Second of all, if you are in service, and if your salary is above Rs. 15,000 (I would be surprised if anyone with a lower salary reads this!), then you will have to submit an application via your employer to the EPFPO to deduct a sum equal to 8.33% of your basic +DA towards the EPS. The above circular enables this provision.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Update 2nd April 2019: The supreme court has dismissed a petition by the EPFO and ordered the released of revised pension.

How much EPS Pension will I get? The rules

To keep things simple, we will assume that you joined service after 15th Nov. 1995. The pension is calculation is different for older employees (See Bemoneyaware link below).

EPS Pension = (Pensionable annual Salary   X  Number of Years Service)/70

Pensionable annual salary = average of last 5 years contribution to EPS. This is the key differentiator. Under the old rules, this could not be higher than Rs. 15,000 per year after 1st Sep 2014 and Rs. 6500 per year before that.

Now, if you contribute 8.33% of your actual basic+DA, then will be used in the revised EPS pension calculation. See examples below.

The number of Years Service = 10 (minimum eligibility of EPS pension) to maximum 35 years of service. If the service is 20 years or more, 2 years will be added as a bonus.

If the no of years of service is less than 10, you can withdraw the EPS amount. Now does that give you ideas if you increase EPS contributions? 🙂 Of course, if you withdraw, then past service will not be carried forward.

Example with ceiling salary for EPS contribution

Suppose a person works for 20 years and retires on 1st Sep. 2015 (to make calculations simple).

Pensionable salary = average of last 60 months ceiling salary as applicable.

In the last 12 months before retirement this is 15,000  (1250 a month) and before that it is Rs. 6500 (542 a month)

So we have pensionable monthly salary = [(48 x 542) + (12 x 1250)]/60 = Rs. 684

Pensionable annual salary ~ Rs. 8203 (12 times 684)

EPS Pension = 8203 x (20+2)/70 ~ Rs. 2578

Example with and without ceiling salary for EPS contribution

Now consider a person retiring on 1st Sep. 2019 after 20 years of service. She applies for enhanced pension and it is set in force from Sep. 2017

From Sep 2013 to Aug 2014: EPS contribution is Rs. 542 a month

From Sep. 2014 to Aug 2017: EPS contribution is Rs. 1250 a month

From Sep 2017 to Aug 2018: EPS contribution is 8.33% of 50,000 (which is her basic +DA, say) = 4165

Pensionable salary =[ (12 x 542) + (36 x 1250) + (12 x 4165)]/60 ~ 1692 (monthly)

Pensionable annual salary  = 20,304

Revised EPS pension = 20304 x 22/70 ~ 6382

If the EPS contribution was not increased EPS pension would have been Rs. 4183.

Thus by increasing the EPS contribution to 8.33% of full salary, the monthly pension has increased by about 53%.

Hang on.  A sum of 34,980 was “contributed” to the EPS for this higher pension. Is it worth it? In this case, yes the higher contribution was only for one year. So it does not make much of a difference one way or another.

The EPS has to pay an annuity of 6.29% from the 34,980 as extra 2199 pension. That is not a terrible deal for them.

In this case, the extra contribution to EPS was paid only over a year. So there is no time value of money involved. That is, She could not have got much benefits had the money remained in EPF and not shifted to EPS.

You can use the calculator linked below to estimate your EPS pension in this method. This is for those retiring in the near future.

Here is a screenshot

Revised EPS Pension Calculation Screenshot of the free Excel Download

Projections with and without ceiling salary for EPS contribution

Now let us consider a  projection from the first year of employment. This is important because only last 5Y contributions to EPS is used for pension calculation, but the contributions are made from the first year of service. This means that if you are going to retire in the next few years, you can get the benefit of higher EPS pension without losing much to EPS. Please correct me if this understanding is incorrect.

Now consider a person starting with an annual salary of 6 Lakh (basic + DA alone)

The rate at which salary (basic + DA alone) will increase each year = 5%

Years in service = 20

If the EPS contribution was fixed at 15,000 a year, the total contribution over 20 years = 3 Lakh

If the EPS contribution was 8.33% of full basic + da for all those 20 years, the total contribution to EPS = 16.52 Lakh.

The monthly EPS pension at 15,000 celing  = 4,714.

The monthly EPS pension at full salary deduction = 36,089

Now had you not invested that mony in EPS and it was left in EPF and if we assume an interest rate of 8% return (you can change these numbers in the calculator), then upon retirement, you will get 28.70 Lakh. This is only the employers contribution. Your contribution is separate and not part of this illustration.

If you are going to take this 28.70 lakh and buy yourself an annuity from a life insurer at 6% rate, you will only get a pension of 14,354. This is only 40% of the EPS pension.

So if your aim is to take the EPF contribution (at least the employers contribution alone) and buy an annuity from it, then enhancing EPS contribution to get the revised EPS pension sound much, much better.

Even if the EPS pension reduced to 50% upon the death of the pensioner, it will still be approximately equal to the annuity pension. The only downside is the annuity pension is returnable (for a lower annuity rate) and this is not possible with EPS.

My guess is that if there are too many requests for enhances EPS pension, the EPFO will go bankrupt.

Hang on, the illustration is not over.

Why would you want to buy an annuity? If you took that 28.70 lakh and invested it in a portfolio offering 10% after tax (not impossible, you can change this in the calculation) and withdrew from it an amount equal to the enhanced EPS pension increasing at 8% a year (inflation), you will be able to provide an inflation-protected income for about 7 years in retirement (remember this is only from the employers contribution, Your contribution corpus + other invests you make remain outside this calculation.).

On the other hand, if you received that enhanced EPS pension, the 8% inflation (you can change it as desired in the calculator) will reduce the purchasing power of this pension by 50% in 8.3 years. The duration for the enhanced withdrawal is almost the same as the duration over which the constant pension drops in value by 50%.

I will leave it to you to interpret these numbers. Most of you will not agree with me but that instead of a constant pension that decreases in value each year, I will opt for more money in hand to invest the way I want. This gives me a better ability to handle inflation and other emergencies.

This love for pension should remind of this: Why have we not seen a retirement crisis in India? and

Caring for elderly parents: An emotional and financial crisis

Should I opt for Revised EPS Pension?

If you have enough corpus other than this 28.7 lakh to combat inflation and prefer to get a higher pension from EPS pension, then go ahead. The only trouble, you will be paying more tax.

If you do not have enough corpus from other sources and cannot combat inflation anyway, then again get a higher pension from EPS.

There is a middle region between the two choices where this EPF corpus could make a difference to how well you manage inflation in retirement. For them at least, the enhanced EPS pension does not make sense. My advice is to not get overexcited at the prospect of higher EPS pension. Look at both sides of the picture. Use the freefincal robo advisory template, punch in your numbers and then decide how robust your retirement is.

Screenshots of EPS Pension Calculator in Excel

Entry page of EPS Pension Calculator in Excel

Revised EPS Pension Calculator in Excel (2017) Comparison page

Download the EPS Pension Calculator in Excel

 

Update on higher EPS Pension

Higher EPS Pension: Can EPFO pay Higher Pensions or will it go bust?

 

References & Credits

1: Kirti’s fantastic guide to EPS pension calculation at Bemoneyaware

2: Insightful discussions with Ashal Jauhari (FB Group Asan Ideas for Wealth, admin), Chandan SIngh Paidyar (fee-only planner) and Kapil Tiwari

Note: I am an NPS investor and could be wrong in my interpretation. Please check the numbers thoroughly before using. Do let me know asap if any correction is necessary.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)