Pension Calculation Confusion: How Do We Determine Pensionable Age and Why Divide by 70?

Understanding Pension Calculation

As we all know, pension is calculated as PENSIONABLE AGE MULTIPLIED BY PENSIONABLE SALARY DIVIDED BY 70. How do we calculate the Pensionable Age, and why do we divide it by 70? Can anyone please shed some light on this subject matter?

Thank you for your help.

Regards,
J. P. Das

It is not the pensionable age, but pensionable service. It is the service from a) 16.11.1995 or the Date of Joining in EPS, whichever is later, to b) the date of leaving from EPS, i.e., the date of attaining the age of 58 years or the date of leaving EPF, whichever is earlier.

At the time of the introduction of EPS-95, as per the Central Government Service Pension Scheme, the pension eligible for a service of 33 years or more is 50%. In EPS-95, for 33 years of pensionable service, a bonus of 2 years will be granted (this is applicable for a pensionable service of 20 years or more). That is, 33 years of service will be treated as 35 years for pension calculation. Accordingly, to get 50%, 35 has to be divided by 70, and the above formula is derived.

Regards,
Abbas.P.S

Dear Mr. Abbas, I am grateful to you once again. Let me share my perspective. Let's say A joined on 01.01.1991 and B on 01.01.2001, both starting at the age of 25. A retires at 58 on 01.01.2024, and B retires on 01.01.2034. According to EPS-95, A's pensionable service would be around 28 years, and B's would be about 33 years. Kindly confirm if my understanding is correct.

Secondly, why is it a 50% pension, as you mentioned in the second point? A person retiring in Y2010 would not receive a 2-year bonus (as per EPS-95, their pensionable service would be 15 years at retirement).

I would appreciate your valuable comments on this matter.

Thank you.

Your understanding of the first paragraph is correct. 50% is for 33 years' service. The context has already been explained. At the time of EPS introduction, there wasn't any eligibility for service pension for 15 years' service. Hence, there is no room for discrepancy.

Regards,
Abbas.P.S

Dear all,

Good noon, I have a small doubt in PF Pension calculation formula. Please elaborate on the doubt I have. The formula is Average salary X Number of years of service / 70. Why is 70 taken for dividing?

Regards,
Prakash K

Can you please explain what is 70 in the formula? Why do we use 70 only? Is there any specific reason for using 70 in the formula?

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In the formula, the number 70 is used for a specific reason. It represents a constant value that has been determined based on certain factors or calculations. This value is essential for the formula to produce accurate results or achieve a specific outcome. The choice of using 70 in the formula is based on the requirements and variables involved in the particular context where the formula is applied.