The EPFO ​​continues to bring good news to millions of employees. On September 14, the government took a major decision to raise the wage limit under the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS) from ₹15,000 to ₹25,000 per month. Additionally, there are reports that PF withdrawals via UPI will become operational by the end of this year.

This offers a double benefit to employees associated with the EPFO. Furthermore, the implementation of the new ₹25,000 wage ceiling effectively results in a jump of over 60% in the pension calculation base. With this increase, employees might be wondering whether their pension will rise or fall. Let us understand the details.

Understanding the pension math through the formula:
Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Pensionable Salary: The government sets an upper limit (ceiling) for this. Previously ₹15,000, it has now been raised to ₹25,000.

Pensionable Service: This refers to the number of years you have been employed. (According to the rules, if you have served for 20 years or more, you receive an additional 'service bonus' of 2 years.)

How much does the company contribute?
12% of your basic salary goes into the PF, and the company contributes an equal 12%. Of the company's contribution, 8.33% goes into the EPS fund, and the remaining 3.67% goes into the EPF account.

By how much has the pension increased due to the new wage limit? If your basic salary is ₹25,000 or more, here is how significant the difference in your monthly pension would be between the old ₹15,000 ceiling and the new ₹25,000 ceiling.

Years of Service | Bonus Years | Calculated Years | Pension at Old Ceiling (₹15,000) | Pension at New Ceiling (₹25,000) | Monthly Pension Increase

   20 years                  | 2+ years         | 22 years               | ₹4,714                                        | ₹7,857                                            | PLUS ₹3,143

Note: A bonus of 2 years of service has been added to the pension calculation for service exceeding 20 years.

Calculation
Suppose your basic salary is ₹25,000 and you have served for 20 years. With the new rules in effect, your pensionable salary will be considered ₹25,000. Based on the formula (25,000 x 20 / 70), your pension would be ₹7,142 per month. This means you would gain ₹3,143 under the scheme with the ₹25,000 salary limit.

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