During your working years, your monthly salary covers household expenses, children's education, and other essential needs—but what will you rely on for a regular income after retirement? For millions of employees in the private sector, the Employees' Pension Scheme (EPS) addresses this need. The longer your career and the higher your pensionable salary, the better your monthly pension will be upon retirement.

Did you know that completing 20 years of service grants an additional two-year weightage when calculating your pension? For instance, if an employee has a pensionable salary of ₹25,000, what kind of pension could they receive based on 20 years of service? Let’s look at the full calculation.

What is the EPS, and who is eligible for a pension?
The Employees' Pension Scheme (EPS) is a scheme managed by the EPFO. Pension contributions are not deducted directly from an employee's salary; instead, a portion of the employer's (company's) contribution is directed into the pension fund. Generally, employees who complete at least 10 years of eligible service become entitled to a monthly pension. The standard age for receiving this pension is 58.

The EPFO’s formula for calculating the EPS pension:
Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70

*   Pensionable Salary: The government sets an upper limit (ceiling) for this. Previously set at ₹15,000, this limit has now been increased to ₹25,000.

*   Pensionable Service: The total number of years you have been employed. (According to the rules, if you have completed 20 years or more of service, you receive an additional 'service bonus' of 2 years.)

What are the benefits after 20 years of service? According to EPS rules, an employee who completes 20 years or more of eligible pensionable service receives an additional weightage of two years for the purpose of pension calculation. This means that 20 years of service is treated as 22 years for the calculation.

For instance, if an employee has a pensionable salary of ₹25,000 and has contributed to the EPS for 20 years, the calculation would be as follows:

Pensionable salary: ₹25,000
Actual service: 20 years
Additional weightage: 2 years
Total calculable service: 22 years
Now, applying the formula:

₹25,000 × 22 ÷ 70 = ₹7,857

In this example, the employee could receive a monthly pension of approximately ₹7,857 upon retirement at the age of 58.

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