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Retirement is a major milestone in every working person’s life. Along with emotional changes, financial security becomes the biggest concern. To ensure stability after retirement, the Employees’ Provident Fund Organisation (EPFO) provides two important schemes — the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS).

Many employees often get confused between these two and are unsure how much money or pension they will receive after retirement. Understanding the difference between EPF and EPS and learning the pension calculation method can help individuals plan their future better.

EPF and EPS serve different purposes, even though both are linked to your salary deductions.

EPF is a long-term savings scheme. During your working years, both you and your employer contribute a fixed percentage of your salary to this fund. Over time, this amount grows with interest. At the time of retirement, the employee receives this accumulated amount as a lump sum.

EPS, on the other hand, provides a fixed monthly pension after retirement. It works like a social security system that guarantees regular income for life. While EPF gives you a large one-time payment, EPS ensures monthly financial support.

The pension amount under EPS is calculated using a fixed formula:

Monthly Pension = (Pensionable Service × Pensionable Salary) ÷ 70

• Pensionable Service refers to the total number of years you have contributed to EPS.

• Pensionable Salary is the average of your basic salary and dearness allowance, capped at ₹15,000 per month.

If an employee has worked for 20 years and their pensionable salary is ₹15,000:

(20 × 15,000) ÷ 70 = ₹4,285 per month

This means the person will receive approximately ₹4,285 as monthly pension after retirement.

To qualify for EPS pension, certain conditions must be fulfilled:

• A minimum of 10 years of service is mandatory.

• Pension can be claimed after reaching the age of 58 years.

• Employees retiring between the ages of 50 and 58 can opt for early pension, but the amount will be reduced.

• Under the EPS 1995 scheme, family members and nominees are also entitled to pension benefits in case of the employee’s death.

India has nearly 7 crore EPF subscribers. For most salaried individuals, these schemes act as a financial backbone after retirement.

The lump sum received from EPF can be used for major expenses such as medical treatment, home renovation, or debt repayment. Meanwhile, EPS provides steady monthly income that helps meet daily living expenses.

Together, these two schemes ensure both short-term and long-term financial security. EPF supports large financial needs, while EPS guarantees continuity of income.

EPF and EPS work as a strong social security shield for salaried employees. While EPF helps build a retirement corpus, EPS ensures lifelong pension income. By understanding the calculation method and eligibility rules, employees can plan their retirement wisely and avoid financial stress in later years.

Proper awareness and timely planning can make retirement not only comfortable but also financially independent.