Pension Calculation Methods: How Do They Differ Before and After the 1995 Scheme?

I need information regarding pension calculation before the 1995 pension scheme and after the 1995 pension scheme. What are the calculation methods? Kindly share the information.

Pension Calculation Before and After the 1995 Scheme

EPS was amended in November 1995. Until that date, you had to calculate the pension based on the past service years corresponding to a fixed slab. This slab referenced whether the salary was less than or above Rs. 2500 and was multiplied by a factor as per Table-B for past service benefits.

Regards, Chandru

Introduction of the EPS Scheme

EPS was introduced (not amended) by an ordinance on 16.11.1965 and later passed as a bill by the Parliament on 28.2.1996. Until then, a family pension was available. If a member died while in service, the family would receive a pension. In the new scheme, members themselves are entitled to receive a pension. After the member's death, the family will receive a pension.

Regards,
Abbas.P.S

Clarification on Pension Calculation

Santhosh wants to know the calculation steps/procedure and not the history about the FPS and EPS. Again, I see that members are not answering the crux of the question asked here. They generally reply with all the theoretical answers they know and not the much-required answer. Ultimately, the thread runs into several pages without any meaningful reply.

Regards,
Chandru

Pension Calculation Methodology

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 one is referred to as past service, and the latter as pensionable service.

Past Service Calculation

Past service is divided into four slabs:
- Service up to 11 years
- 12 to 15 years
- 16 to 19 years
- 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 Rs. 2500 & above, the compensation will be Rs. 85, 105, 135, and 170. This amount is for those who turn 58 years old on 16.11.95. For those who turn 58 years old 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 reaching 58 years.

Pensionable Service Calculation

There is a formula to calculate the pension: Pensionable Salary x Pensionable Service / 70. Pensionable salary can be categorized into three groups:
1. Below Rs. 6500
2. Rs. 6500 & above, with a contribution based on the statutory ceiling of Rs. 6500
3. Above Rs. 6500 & choosing to contribute based on actual salary

In the case of the second category, the pensionable salary is Rs. 6500. In the other two cases, the pensionable salary will be the average of the last twelve months. Additionally, if pensionable service is 20 years & above, a 2-year bonus will be granted.

Example Calculation

- Date of Birth: 2.1.1961
- Date of Joining: 23.2.1987
- Salary on 16.11.95: Rs. 2500 & above
- Salary on completion of 58 years on 1.1.2019: Rs. 6500 (Statutory Ceiling)
- Past Service: 8 yrs 9 m (approximately 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 & 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 & above): 2
- Pensionable Salary: Rs. 6500
- Pensionable Benefit: 6500 x 25 / 70 = 2321 - (B)

- Total Pension: (A) + (B) = Rs. 2840

Regards,
Abbas. P. S.

One gentleman has provided a nice Excel sheet for pension calculation. Please refer to the posts from about a month ago. Let me check if I have it saved, in which case I will attach it.

Regards

I started my job before 15/11/1995. How can I calculate the pension amount?

Thank you.