EPFO: When and how will private sector employees get lifetime pension?

EPFO: Everyone working in the private sector sees the PF deductions on their salary slips, but the EPS portion often remains a mystery. While the interest and principal amount of PF are clearly visible in the passbook, the pension column always seems confusing. In reality, this scheme of the Employees' Provident Fund Organization (EPFO) is not just a savings scheme, but a major support for your old age. Recent changes in rules and ongoing discussions regarding salary limits have raised many questions in the minds of ordinary employees. If you are also in a private job, it is very important to understand when and under what conditions your hard-earned money will be credited to you in the form of pension.

Two Important Conditions for Pension

To become eligible for pension, the EPFO has set two strict conditions, without fulfilling which you cannot receive the monthly pension benefit. The first and most important condition is to complete 10 years of "pensionable service." It is important to understand that the method of counting years of service is different. If you change jobs mid-term and withdraw your PF funds, that past service time will not be counted towards your pension service. Pension service is only added when you transfer your PF to the new company. The second condition relates to age. To receive a full pension, an employee must be 58 years old. This means that 10 years of savings and the age of 58 together entitle you to a lifetime pension.

How does the money deducted from your salary reach the pension fund?

People often assume that their entire PF deduction is deposited into their account, but the math is a little different. 8.33% of the contribution made by your employer to your PF goes towards the Employees' Pension Scheme (EPS). However, this contribution is not based on your full salary, but on a wage ceiling set by the government. This is why even employees earning lakhs of rupees a month cannot receive a pension above a certain limit. This money doesn't come directly into your hands, but instead accumulates in a pool, which you receive back as monthly income after retirement.

Early taking a pension at age 50 can be costly

The pension amount also depends on when you start taking it. According to EPFO rules, you can take a pension even after the age of 50, but it is considered 'early pension'. If you start your pension at age 50, without waiting until age 58, your pension amount is reduced annually. This reduction is permanent, meaning you will receive less money throughout your life. Conversely, if you don't take your pension after 58 and postpone it until age 60, you can receive an increased pension.

If you leave your job before 10 years, will you get your money?

Employed people always fear that if you don't complete 10 years of service, will your pension money be lost? The answer is no. If your total service is less than 10 years, you are not entitled to a monthly pension, but your money remains safe. You can opt for a lump sum withdrawal upon leaving your job. For this, the EPFO uses a special 'service table'. In this, a factor is determined based on your years of service, which is multiplied by your salary to give you a lump sum.