EPFO Releases Circular On Pension Computation Method: Check New Calculation Formula Here

If the pension of the employee started before September 1, 2014, the higher pension for the employee would be based on the average salary drawn of the employee in the last 12 months of his contributory period prior to his retirement.

EPFO higher pension: The Employee Provident Fund Organisation, in its new circular has released a circular talking about the computation method through which higher pensions of those employees who have opted for higher pension based on actual salary under Employee Pension Scheme (EPS). As per the new circular, the calculation of higher pension will be different for those employees retiring before September 1, 2014, from those who are retiring after this particular date.

What Makes September 1, 2014 So Important?

The Central government revised the pension calculation formula in September, 2014. Before the government changed the calculation formula, the average salary of the employee during the 12 months preceding the date of his/ her retirement was considered for the pension but after September, 2014, the average salary months to be considered for calculating the pension was increased to 60 months.

The formula which is applicable currently to calculate your pension is:

=(Average salary of 60 months X service period) divided by 70.

Here, the average salary denotes only the basic salary of the employee but for those employees who have opted for higher EPS, full salary inclusive of allowances will be applicable.

Pension Calculation Of Those Retired Before September 1, 2014

If the pension of the employee started before September 1, 2014, the higher pension for the employee would be based on the average salary drawn of the employee in the last 12 months of his contributory period prior to his retirement.

Pension Calculation Of Those Who Retired After September 1, 2014

For the ones who have retired after September 1, the pension will be calculated based on the average salary drawn of the employee in the last 60 months of his contributory period prior to his retirement. Therefore, the new circular will be applicable on the employees who have retired after September 1, 2014, that is their higher pension will be calculated based on average of their last drawn salaries in the last 60 months.