For eligible members covered under the Employees’ Pension Scheme (EPS) 2026, the salary and increments they earn during the final five years of service can have a greater bearing on their pension than the salary earned during much of their earlier career.
This is primarily because EPS does not calculate pensionable wages using an employee’s entire career average. In fact, it looks at the average monthly wages over the 60 months immediately preceding a member's leaving the scheme. This aspect makes the final five years particularly important for pension calculation and planning.
EPS formula for monthly pension calculation
Monthly Pension = (Pensionable Wages × Pensionable Service) ÷ 70
For example, if pensionable wages are ₹15,000 and pensionable service is 30 years, the monthly pension would be about ₹6,429. With 15 years of service, the pension would be around ₹3,214.
The scheme provides for a two-year weightage to pensionable service for members who retire after completing at least 20 years of service. Still, this only increases the service component. It does not change the fact that pensionable wages are based on the final five years of service.
Service years and final wages shape pension
Pensionable wages are subject to the applicable wage ceiling. Currently, the ceiling is ₹15,000 per month until a member qualifies under the provisions for higher pension contributions. Thus, salary increases beyond this limit generally do not increase the pension calculation.
At the standard ₹15,000 pensionable-wage ceiling, a member with 35 years of pensionable service would have a formula-based pension of ₹7,500 a month ( ₹15,000 × 35 ÷ 70).
This is a commonly cited illustration, not a universal maximum for every EPS member, as it directly depends on the total service rendered by an individual. EPFO's scheme material provides for pensionable service of up to 35 years, subject to the applicable rules.
This rule also accounts for periods when an individual employee does not receive full wages. Certain non-contributory or unpaid periods can be adjusted so that the pensionsable wage calculation is based on actual wage-earning days.
In summary, EPS rewards not just long service periods but also the wage level maintained towards the end of that service. For eligible employees, pay revisions, promotions and consistent employment during the final five years can therefore make a difference to their pensions in retirement.
(Disclaimer: This article is for informational and educational purposes only. EPS pension calculations and eligibility are subject to applicable EPFO rules, government notifications and individual circumstances. Readers should verify their eligibility and pension amount with EPFO or a qualified adviser before making financial or retirement decisions.)
