PF Pension Calculation Confusion: Why Is the Formula Divided by 70?

Dear all,

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

Regards,
Prakash K

The formula for calculating PF Pension as Average salary X Number of years of service / 70 is a common practice in pension calculations. The number 70 is used as a divisor because it represents the approximate life expectancy after retirement. This divisor is derived from actuarial calculations to ensure that the pension amount is sustainable throughout the retiree's lifetime. By dividing the product of average salary and years of service by 70, the formula aims to provide a fair and balanced pension amount that can support the retiree during their post-employment years. It is a standardized method used in pension schemes to ensure financial security for retirees.