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Sunday, 28 December 2014

Calculation of Pension Under Employees’ Pension Scheme (Series-3)

I have already posted articles on Features and Benefits available under the Employees’ Pension Scheme. In this post I will discuss the procedure to calculate the pension. If you want to read my earlier posts related to EPS then you may follow the link provided below.



In case of New Entrants:- (Joining Service After 15.11.1995)

Monthly Superannuation/Early Pension = Pensionable Salary X Pensionable Service /70
*Pensionable Salary shall be limited to Rs 15,000/- per month as per notification dated 01/09/2014.
*Pensionable Salary was hiked from Rs 5000 w.e.f 01/06/2001 to Rs 6500 and continued till 31/08/2014.
*While calculating Pensionable Salary we have to take the average of monthly pay drawn during 60 months preceding the date of cessation of membership.
* In case of early pension, the amount of pension shall be reduced by 4% for every year the age fall short of 58 years.
*If an individual has rendered Pensionable Service for 20 years or more, than his/her pensionable service will be given an additional weightage of +2.
*Minimum Pension is fixed at Rs 1000/- per month.

Calculation of Early Pension (50 -57 years)

The pension will reduced by 4% for each year falling short of the stipulated 58 years. The actual pension should be multiplied by following factor to arrive at the actual pension which may be received by the Subscriber.

Age
Multiplication Factor (Actual Pension*Factor)
50
0.7025
51
0.7306
52
0.7599
53
0.7903
54
0.8219
55
0.8548
56
0.8889
57
0.9245
58
0.9615

Commuted Pension (Discontinued since 2008)

A member is eligible to Pension under the scheme, may opt on completion of 3 years from commencement of scheme to commute maximum of 1/3 rd of his/her pension so as to receive 100 times the monthly pension so commuted while the balance pension will be paid on monthly basis.
But Commutation of pension has been discontinued and Subscribers no longer have the option to commute 1/3 rd of their pension.

Return of Capital (Discontinued since 2008)

A member may opt to draw Reduced Pension and avail Return of Capital under following alternatives.

ALTERNATIVES
REDUCED PENSION PAYABLE
Amount Payable As Return of Capital
Pension during Life time of member with return of Capital on Death
90% of Original Monthly Pension.
100 times the original monthly pension, to the member’s nominee.
Pension during Life Time of member, further reduced pension during life time of the widow or till her remarriage, whichever is earlier, and return of capital on widow’s death/remarriage.
90% of Original monthly pension to the member. 80% of the original monthly pension to the widow, till her death/remarriage.
90 times the original monthly pension on death/remarriage of spouse to the member’s nominee.

Pension for a fixed period of 20 years, whether member lives or not
87.5% of the original monthly pension, to the member or to his nominee.
100 times the original monthly pension at the end of 20 years, to the member or to his nominee.

The norms have been amended and Return of Capital is no longer admissible.
Calculation of Pension for the Period before 15.11.1995 (Family Pension Scheme, 1971)

Pre 15.11.1995 the following procedure was adopted to calculate the pension.
TABLE A
Past Service
Salary Upto Rs 2500/-
Salary Above Rs 2500/-
Upto 11 yrs
Rs 80/-
Rs 85/-
11-15 yrs
Rs 95/-
Rs 105/-
15-20 yrs
Rs 120/-
Rs 135/-
Above 20 yrs
Rs 150/-
Rs 170/-

The above amount is the benefit payable on completion of 58 years of age as on 16.11.1995. 
For the calculation of pension benefits before 58 years (if a member do not complete 58 years of age on 15.11.1995, his past service benefit will be increased by the below factor - Early pension cases ) the above benefit is multiplied by the TABLE- B factor to arrive at the past service benefit. 

TABLE B
less than 1 year
1.049
less than 2 year
1.154
less than 3 year
1.269
less than 4 year
1.396
less than 5 year
1.536
less than 6 year
1.689
less than 7 year
1.858
less than 8 year
2.044
less than 9 year
2.248
less than 10 year
2.473
less than 11 year
2.720
less than 12 year
2.992
less than 13 year
3.29
less than 14 year
3.621
less than 15 year
3.983
less than 16 year
4.381
less than 17 year
4.819
less than 18 year
5.301
less than 19 year
5.810
less than 20 year
6.414
less than 21 year
7.056
less than 22 year
7.761
less than 23 year
8.537
less than 24 year
9.390

 Past Service benefit: 

Pensionable Salary   X   Pen. Service 
70


subject to minimum of Rs.335, Rs. 438, Rs.635 for receiving early pension ( before 58 years) for date of commencement of pension between 01/04/1993 and 15/11/2000, 16/11/2000 and 15/11/2005, 16/11/2005 respectively
AND
subject to minimum of Rs.635, Rs.438, Rs.335 for receiving pension on or after 58 years for date of commencement of pension between 01/04/193 and 15/11/2000, 16/11/2000 and 15/11/2005 , 16/11/2005 respectively.

(If member has joined after 15.11.1995, only Pensionable Service Benefit is applicable)

Proportionate reduction: Arises if the past service is less than 24 years and aggregate pension calculated is less that Rs.500/-.

Illustration:-
Date of Birth: 01/01/1960
Date of Joining: 01/01/1985
Salary as on 15/11/1995: Above Rs 2500/- per month.
Salary on Completion of 58 years as on 01/01/2018: Rs 15,000/-.
Past Service Approximately: 10 years (rounded off)
Compensation: Rs 85/-. (For Past Service as per Table A)
Factors as per Table B (difference between 01/01/2018 and 15/11/1995): 6.064
Past Service Benefit (Table A x B): Rs 85 x 6.064= Rs 515.44
Pensionable Service from 15/11/1995): 22 years
Additional Weightage: 2years
Pensionable Salary: Rs 15,000/-.
Pension Admissible: 15000 x 24/70 = Rs 5142.00
Total Pension: Rs 5142+Rs 515 = Rs 5,557/-. (approx).


Note:- Pensionable Salary comprises of average of last 60 months salary, thereby in the above illustration it will include Rs 6500 for first 12 months which has been ignore to simplify calculation and make it easy.

4 comments:

  1. if i have another pension scheme, will i be eligible for eps pension

    ReplyDelete
    Replies
    1. If your salary is under 15k pm and covered under EPF or you are already enrolled under EPS then you will eligible for Pension irrespective of other pension schemes you have subscribed.

      Delete
  2. pl.calculate the actual pension on above example ie 12 month 6500 and 48 months 15000

    ReplyDelete
  3. pl.calculate the actual pension on above example ie 12 month 6500 and 48 months 15000

    ReplyDelete