Hike in minimum EPS pension of Rs 1,000 under consideration by EPFO: Know who will benefit and how?

EPFO members have been pushing for an increase in the minimum monthly pension under the Employees' Pension Scheme (EPS-95) for quite some time. Their wait may soon be over as the ministry of labour and employment is reportedly considering raising the minimum EPS pension from Rs 1,000 a month.

The government, however, hasn’t specified how much minimum EPS pension will be increased, but any rise is likely to help many EPFO members who are eligible for lower pension than the minimum limit. Are you one of those who could benefit if you have completed more than 10 years of service with EPS contributions? Who stands to gain if the government increases the minimum EPS pension limit to somewhere between Rs 1,500 and Rs 3,000? Let’s figure it out!

Who is eligible for EPS-95 pension?


Employees contributing to Employee Pension Scheme (EPS) from their monthly salaries up to wage ceiling of Rs 15,000/month and have contributed for a minimum period of 10 years are typically eligible for EPS pension. Some employees who joined the scheme before September 1, 2024, and opted for higher contributions to EPS with their basic salaries above the wage cieling of Rs 15000, are already eligible for higher EPS pension due to a Supreme Court order. As they are drawing a higher pension, it is highly unlikely that they will be impacted by minimum pension hike unless it's very substantial.

A key change in the scheme occurred in 2014 when the government announced that from September 1, 2014, onwards any new employee joining a company with a basic salary of more than Rs 15,000/month can only join the EPF and can’t become a member of the EPS pension fund.

How is EPS pension calculated?

The formula to calculate the EPS pension is-

Pension= (Pensionable salary (average of last 60 months) X pensionable service years)/70

Another important EPFO rule is that if the service years of an employee are 20 or more, they get a 2-year bonus with their service length. It means, if someone has completed 20 years of service, their service years for EPS pension calculation will be counted as 22 years. Similarly, if service years are 25, they will be counted as 27.

EPS pension calculation for employee with Rs 15,000 average pay

Now, let’s see the pension an employee with Rs 15,000 average basic pay in the last 60 months, which is also the current wage ceiling for EPS contribution, will get for different service years.

Average basic pay	Service years	Pension
₹ 15,000	10	₹2,142.9
₹ 15,000	15	₹3,214.3
₹ 15,000	20	₹4,714.3
₹ 15,000	25	₹5,785.7
₹ 15,000	30	₹6,857.1

Since, the employee is eligible to get an EPS pension of more than Rs 1,000, such an employee will typically not benefit if the hike is nominal. They will benefit only if the government increases the minimum pension limit to more than Rs 2,143.

In our next examples, you will see the employees who will benefit if the government increases the minimum EPS pension limit in the range of Rs 1500 to Rs 3,000.

Who benefits under Rs 1,000 minimum EPS pension?

In the first two examples, we will take a service period of 10 years for the wage starting at a lower level of Rs 5,000 and going up to Rs 15,000, which is also the wage ceiling for calculating the EPS pension.

Average basic pay	Service years	Pension	Benefits from Rs 1,000 minimum pension
₹ 5,000	10	₹ 714.3	Yes
₹ 5,500	10	₹ 785.7	Yes
₹ 6,000	10	₹ 857.1	Yes
₹ 6,500	10	₹ 928.6	Yes
₹ 7,000	10	₹ 1,000.0	No
₹ 7,500	10	₹ 1,071.4	No

In the table, you can see that employees with 60-month average basic pay of less than Rs 7,000 are getting less than Rs 1,000 pension as per calculations, but they benefit from the minimum EPS pension limit of Rs 1,000 since at least that much amount is guaranteed by the government.

However, if their average basic salary is Rs 7,000 or higher, they will anyway get Rs 1,000 or a higher pension amount.

In other examples, let’s see which employees will benefit if the government increases the minimum EPS pension amount up to Rs 3,000/month.

Who will benefit if the government increases the minimum EPS pension limit to Rs 1,500?

Average basic pay	Service years	Pension	Benefit from Rs 1,500 minimum pension
₹ 10,000	10	₹ 1,429	Yes
₹ 11,000	10	₹ 1,571	No
₹ 12,000	10	₹ 1,714	No
₹ 13,000	10	₹ 1,857	No
₹ 14,000	10	₹ 2,000	No
₹ 15,000	10	₹ 2,143	No

Who will benefit if the government increases the minimum EPS pension to Rs 2,000?

Average basic pay	Service years	Pension	Benefit from Rs 2,000 minimum pension
₹ 10,000	10	₹ 1,429	Yes
₹ 11,000	10	₹ 1,571	No
₹ 12,000	10	₹ 1,714	No
₹ 13,000	10	₹ 1,857	No
₹ 14,000	10	₹ 2,000	No
₹ 15,000	10	₹ 2,143	No

Who will benefit if government increases the minimum EPS pension to Rs 2,500?

Since we need to calculate the pension within the wage ceiling of Rs 1,5000, we will increase service years from 10 to 12 to accommodate more examples.

Average basic pay	Service years	Pension	Benefit from Rs 2,500 minimum pension
₹ 10,000	12	₹ 1,714	Yes
₹ 11,000	12	₹ 1,886	Yes
₹ 12,000	12	₹ 2,057	Yes
₹ 13,000	12	₹ 2,229	Yes
₹ 14,000	12	₹ 2,400	Yes
₹ 15,000	12	₹ 2,571	No

The calculations show how employees with service years up to 12 will benefit if the government increases the minimum EPS pension amount to Rs 2,500.

Who will benefit if government increases minimum EPS pension to Rs 3,000?

To accommodate more examples, we will increase service years from 12 to 14 in this calculation.

Average basic pay	Service years	Pension	Benefit from Rs 3,000 minimum pension
₹ 10,000	14	₹ 2,000	Yes
₹ 11,000	14	₹ 2,200	Yes
₹ 12,000	14	₹ 2,400	Yes
₹ 13,000	14	₹ 2,600	Yes
₹ 14,000	14	₹ 2,800	Yes
₹ 15,000	14	₹ 3,000	No

In this example, you can see how employees with 14 years of service can benefit if the government increases the minimum pension limit to Rs 3,000.

It means that any hike in minimum pension under EPS is likely to benefit mostly those employees who have much lower pensionable salary than the wage ceiling of Rs 15,000 and have pensionable service period on the lower side, typically starting from 10 years and going up to 15 years.

If your pensionable salary is Rs 15,000 and pensionable service period is more than 15 years, it is very unlikely that you will benefit from the proposed pension hike unless the hike is much higher than 3 times.