EPFO Pension Rules Explained: What Happens If You Leave Your Job After 10 Years of Service

For millions of salaried employees in India, the Employees’ Provident Fund (EPF) is one of the most important financial safety nets for retirement. Every month, a small portion of your salary, along with your employer’s contribution, is deposited into your EPF account. But what many employees overlook is that a portion of this contribution also goes into the Employees’ Pension Scheme (EPS) — the fund that guarantees a monthly pension after retirement.

With today’s dynamic job market, frequent job changes are common, and many professionals leave salaried employment after 10–12 years to start a business or pursue new opportunities. This raises an important question — what happens to the pension amount accumulated under EPS if you leave your job after 10 years?

🧾 EPFO Rule on Pension Eligibility

The Employees’ Provident Fund Organisation (EPFO) has clearly defined the rules regarding pension eligibility under the Employees’ Pension Scheme (EPS).

• To qualify for a monthly pension, you must complete a minimum of 10 years of total service (across one or more employers).
• If your service period is less than 10 years, you will not be eligible for a monthly pension, though you can withdraw your EPS contribution as per rules.
• Once you cross the 10-year mark, your pension rights become “vested” — meaning you are entitled to receive a pension, but only after you turn 58 years old.

For example, if you worked for 11 years and left your job at age 40, your pension benefit will remain locked in the system, and you can start receiving it once you reach 58 years of age.

💰 How Your Contribution Is Divided

Under the EPF scheme:

• The employee contributes 12% of their basic salary and dearness allowance (DA).
• The employer contributes another 12%, which is split as follows:
  • 8.33% goes to the Employees’ Pension Scheme (EPS)
  • 3.67% goes to your main EPF account

The EPF balance (your primary savings) can be partially withdrawn for various needs — such as housing, education, or medical emergencies. However, the EPS portion (8.33%) is strictly reserved for your pension after retirement, and its benefit depends on your years of service and average salary.

🧮 How EPFO Calculates Your Monthly Pension

Your pension amount under EPS is determined by the following formula:

Monthly Pension = (Pensionable Salary × Pensionable Service) / 70

• Pensionable Service: The total number of years you’ve contributed to EPS (e.g., 10, 15, or 25 years).
• Pensionable Salary: The average salary of your last 60 months (5 years) before leaving service. The current maximum pensionable salary cap is ₹15,000 per month.

📊 Example Calculation

Suppose your:

• Pensionable Service = 10 years
• Average Pensionable Salary = ₹15,000

Your monthly pension = (15,000 × 10) / 70 = ₹2,143

So, if you’ve worked for 10 years, you’ll receive ₹2,143 per month at age 58.
If you had worked for 25 years, your pension would rise to ₹5,357 per month using the same formula.

🔍 Key Takeaways

• Completing 10 years of service is crucial for earning a lifetime monthly pension under EPS.
• You can withdraw your EPF balance anytime after leaving your job, but the EPS portion can only be accessed after age 58 if you’ve completed the required service.
• Employees should avoid withdrawing EPS early to preserve long-term retirement security.

In short, leaving a company after 10 years doesn’t mean losing your pension — it simply means you’ll start receiving it after retirement age as per EPFO’s pension guidelines.

Originally published on newsworldstime.com.