Concerns About EPS '95 Pension Calculation: Is EPFO's Method Reducing Your Pension?

EPS '95 Pension Calculation Procedure Concerns

The EPS '95 Pension calculation procedure by the EPFO appears incorrect. They are calculating the pension in two spells: (1) the pension up to 31/08/2014 with a pensionable salary of Rs. 6,500/-, and (2) the pension from 01/09/2014 with a pensionable salary of Rs. 15,000/-. This approach is against the procedure stipulated in the EPS '95 manual.

EPS '95 Pension Calculation Formula

The EPS '95 pension calculation formula is as follows: Pensionable Salary X Pensionable Service / 70. Here, the pensionable salary is the average wages of the latest 60 months leading up to the retirement date, which should be singular. However, they are following methods contrary to those stipulated in the EPS '95 manual, which reduces the monthly pension payout.

In this regard, I request the experts to share their valuable opinions and experiences.

Dear Mr. Reddy, the EPS '95 Pension Calculation Procedure is correct. Let me explain to you, as already mentioned above: "Here, the pensionable salary is the average wages of the last 60 months up to the retirement date, which should be the one and only."

So as of now (30th Nov '18), if we count the last 60 months, then it will be (Dec '13 to Nov '18). The wage ceiling for EPS increased to Rs. 15,000 (wef 01st Sep '14). Hence, the average wages of the last 60 months will be:

- 51 months @ Rs. 15,000/m (Sep '14 to Nov '18) = Rs. 15,000/51*12
- 09 months @ Rs. 6,500/m (Dec '13 to Aug '18) = Rs. 6,500/9*12

That will be the average wages for EPS Calculation = Rs. 12,196. For more clarification, let me tell you that in respect of a person who will retire on or after 01st Sep '2019, the average salary will be Rs. 15,000 itself (if EPS contributes up to the wage ceiling amount). Because the whole 60-month period will be related to Rs. 15,000 wages, and pro-rate calculation will not be required.

Hope the matter is cleared now. I seek more expert views on the matter, especially from Mr. Abbas.

Dear Mr. Pan Singh Dangwal, you have arrived at the average pensionable salary as follows, which I can't understand.

Average wages of the last 60 months

51 months @ 15,000/m (Sep '14 to Nov '18) = 15,000/51*12
09 months @ 6,500/m (Dec '13 to Aug '18) = 6,500/9*12
That will be the average wages for EPS calculation = 12,196.

I feel that it should be as follows:

51 months @ 15,000/m (Sep '14 to Nov '18) = 15,000*51 = 765,000
09 months @ 6,500/m (Dec '13 to Aug '18) = 6,500*9 = 58,500
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Total: 823,500 / 60 = 13,725
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Thus, the average wages for EPS calculation should be 13,725.

Please correct me if I am incorrect, and also you have not given clarification on the pension calculation system adopted by EPFO. Please let me know if the EPS pension calculation done in 2 spells is correct or not.