How Much Pension Will I Get at 60, Given My 1800/Month PF Contribution?

Ans: EPS = Average Salary x Pensionable Service/70

(15000X35)÷70=7500
The average salary is the basic salary+DA(Max 15K) of the employee over a period of 60 months prior to retirement. Pensionable service is the total number of years worked(Max 35 years).

Thie minimum and maximum pension that you can receive through EPS is subject to limit of 1K to 7.5K per month

Ans: The pension status after retirement depends on various factors, and it can vary based on the policies of the specific companies you worked for and the pension scheme they offer. Here are some general points to consider:

Previous Employment Pension: If your first company had a pension scheme, you might be entitled to a pension from that organization. The amount could depend on factors like the number of years you worked, your salary, and the terms of the pension plan.

New Employment Pension: Your current company may also have a pension scheme in place. The terms and conditions would be outlined in the pension plan of the current employer, including factors like years of service, salary, and the pension formula.

Government Pension Schemes: Depending on your country, there may be government pension schemes that you are eligible for, such as the Employees' Pension Scheme (EPS) in India. Check the specific rules and eligibility criteria for such schemes in your region.

Private Pension Plans or Provident Fund (PF): If you withdrew your PF from the first company, it might impact your pension status. In some cases, withdrawing PF may affect your eligibility for certain benefits. Check the policies of both companies and any relevant regulations in your country.

Retirement Savings and Investments: If you have personal savings, investments, or other retirement accounts, these will contribute to your overall financial well-being after retirement.

It's crucial to review the terms and conditions of your pension plans with both the previous and current employers. You may want to consult with the human resources department or the pension administrator of each company to get a clear understanding of your entitlements and how they will be calculated. Additionally, consulting with a financial advisor can help you plan for a comfortable retirement based on your specific financial situation.

Ans: Since you've been working in the organization since 2010, you'll be eligible for a monthly pension from this scheme.

The pension amount is calculated based on your service years and average salary during the last five years of employment. The maximum salary considered for this calculation is Rs 15,000, irrespective of your actual salary.

Pension Calculation
For your case, the pension amount under EPS can be estimated using the following factors:

Service Years: 14 years (from December 2010 to January 2025)
Average Salary: Rs 15,000 (since it is capped under EPS)
The formula used by EPS for calculation is:

Pension Amount = (Service Years) * (Average Salary) / 70

So, based on this formula, your pension is calculated as:

Monthly Pension = 14 * Rs 15,000 / 70 = Rs 3,000 per month (approximately)

This amount is an estimation and may vary slightly depending on other factors considered by the EPS at the time of your retirement.

Provident Fund Contribution
Your contribution and your employer’s contribution towards the PF will also create a significant corpus. With 17 years of service, the accumulated amount in your PF account should be substantial. Once you retire, you can either withdraw this amount or opt for periodic payouts to supplement your pension.

Recommendations for Post-Retirement Financial Planning
Maximize PF Benefits: Ensure you withdraw your PF in a manner that maximizes your benefits. If you don't need a lump sum, consider periodic withdrawals.

Invest Wisely: Invest your PF withdrawal in diversified mutual funds to generate a stable post-retirement income. A Certified Financial Planner can guide you in selecting the right funds based on your risk tolerance and financial goals.

Health Coverage: Ensure you have adequate health insurance to cover medical expenses post-retirement. Relying solely on pension and savings might not be enough for unforeseen medical costs.

Budget Planning: Create a detailed budget for your post-retirement life. Factor in regular expenses, medical costs, and leisure activities. This will help you manage your finances efficiently.

Consider Professional Guidance: As you approach retirement, professional financial advice becomes more crucial. Consulting a Certified Financial Planner will ensure that your retirement funds are managed optimally.

Finally
Your pension from the EPS will provide a steady income, but it may not be enough to cover all your expenses. Therefore, it’s crucial to plan ahead, invest wisely, and ensure that your financial future is secure.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello;

Formula for monthly pension under EPS is:

Monthly pension=(pensionable salary X pensionable service)/70

The pensionable salary is the average monthly salary of the last 60 months.

Pensionable service is in number of years while being EPFO member.

Also EPF and EPS are two separate schemes.

EPF you get as lumpsum on retirement while EPS is the pension scheme.

12% of employee contribution and 3.67% of employer contribution goes towards EPF

While only 8.33% of employer contribution goes towards EPS.

As per above formula, your spouse may expect a monthly pension of around Rs. 5350/- after completion of 25 year service.

Best wishes;