Understanding Pension Eligibility and Calculation Under the FPF Act 1995: What You Need to Know

What is the eligibility for the pension under FPF Act 1995 and how is the pension calculated?

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In the FPF Act 1995, eligibility for pension is determined based on various factors such as years of service, contribution amount, and age of the individual. To qualify for pension benefits, an employee typically needs to have completed a certain number of years of service as specified in the act. Additionally, the amount of pension received is calculated based on the average salary earned during the last few years of service and the contribution made to the pension fund.

The pension calculation formula may vary depending on the specific provisions outlined in the FPF Act 1995. It is crucial for individuals to understand the eligibility criteria and pension calculation method to ensure they receive the appropriate benefits upon retirement.

Eligibility and Calculation of Pension under EPS-95

Minimum 10 years' service in EPF is required to get a pension. Regarding pension calculation, I shall provide some details.

There is no upper limit for EPS-95 pension. For pension calculation, the service will be divided into two parts: service before 16.11.95 and service from 16.11.95 onwards. The first part is referred to as past service, and the latter as pensionable service. Past service is divided into four slabs: service up to 11 years, 12 to 15 years, 16 to 19 years, and 20 years & above. If the salary on 16.11.95 is below Rs. 2500, the monthly compensation will be Rs. 80, 95, 120, and 150 respectively. For salaries of Rs. 2500 and above, the compensation will be Rs. 85, 105, 135, and 170. These amounts apply to those who turn 58 years on 16.11.95. For individuals who turn 58 years after 16.11.95, the compensation will be multiplied by a factor specified in Table B, based on the difference between 16.11.95 and the date of completion of 58 years.

For pensionable service, there is a formula to calculate pension: Pensionable Salary x Pensionable Service / 70. Pensionable salary can be categorized into three groups: 1) Below Rs. 6500, 2) Rs. 6500 and above (with contributions at the statutory ceiling of Rs. 6500), and 3) Above Rs. 6500 and opting to contribute based on actual salary. In the second case, the pensionable salary is Rs. 6500. In the other two cases, the pensionable salary will be the average of the last twelve months. Additionally, a 2-year bonus will be given for pensionable service of 20 years and above.

For more details, please visit the website: http://epfindia.com

Example Calculation

- Date of Birth: 2.1.1961
- Date of Joining: 23.2.1987
- Salary on 16.11.95: Rs. 2500 and above
- Salary on completion of 58 years on 1.1.2019: Rs. 6500 (Statutory Ceiling)
- Past Service: Approximately 8 years 9 months rounded to 9 years
- Compensation: Rs. 85
- Factor as per Table B (for less than 24 years, i.e., the difference between 16.11.95 and 1.1.2019): 6.102 (This can be calculated as 1.08 to the power of 24 - 0.5, correct to 3 decimals)
- Past Service Benefit: 85 x 6.102 = Rs. 519 - (A)
- Pensionable Service: 23 years
- Bonus (Service is 20 years and above): 2
- Pensionable Salary: Rs. 6500
- Pensionable Benefit: 6500 x 25 / 70 = 2321 - (B)
- Total Pension: (A) + (B) = Rs. 2840

In addition to the above calculation method, there is a minimum pension for those with service before 16.11.95. In EPS-95, they are categorized into three groups:

1. Date of commencement of Pension before 16.11.2000
2. Date of commencement of Pension between 16.11.2000 and 16.11.2005
3. Date of commencement of Pension after 16.11.2005

As the first two categories have already concluded, I will briefly explain the third category. Minimum pensionable benefit of Rs. 635 and past service benefit as mentioned above, subject to a minimum of Rs. 800. This amount applies to individuals with 24 years or more of service. If the service is less than 24 years, the amount will be reduced proportionately (amount x actual service / 24). However, this amount will be subject to a minimum of Rs. 450.

I will include an Excel worksheet to calculate the pension. Enter Date of Birth, Date of Joining, Date of Separation from Service, Salary on 16.11.95, Salary on Separation from Service (in compliance with the contribution to the pension fund), and any breaks in service before and after 16.11.95, if applicable, in the green-colored column. The results will appear in the yellow-colored column. The red color denotes static information.

For any errors or suggestions, please notify me.

Regards,
Abbas P.S., ITI Ltd, PALAKKAD - 678 623
Ph. [Phone Number Removed For Privacy Reasons]

Dear Ravikumar, I shall answer your questions.

1. The ceiling limit of salary in EPF is Rs. 6500/-.
2. Exemption is applicable in EPS-95 only. (For EPF contributions beyond the ceiling, it is at the discretion of the employer). In statutory contribution, the pension will also be based on the ceiling limit at the time of exit from EPS. In optional cases (i.e., in excess of the ceiling limit), contributions will be based on the actual salary, which varies from time to time, and the pension will be based on the average salary of the last twelve months.

If you have any other questions, please ask.

Regards, Abbas.P.S

Dear Abbasiti, you have provided very good and helpful information here. It will help a lot to understand the pension applicability of a member.