EPS calculation: Pension contribution set to jump 67%; monthly pension after 30 years may be ₹10,714

Until now, that 8.33% was calculated on wages of up to ₹15,000, or ₹1,250 a month. With the ceiling raised to ₹25,000, the same contribution rises to ₹2,083 a month, which is an increase of ₹833, or roughly 67%, for members whose wages are at or above the new ceiling.

Apart from the employer, the Centre chips in as well. "The Central Government shall contribute to the Scheme at the rate of one and sixteen hundredths per cent. of the pay of the members of the Employees' Pension Scheme, limited to such sum as may be specified by the Central Government," the scheme says. For a member at the new ceiling, that share goes up from ₹174 to ₹290 a month.

However, there are two caveats.

First, employees earning more than the ceiling will not see the higher contribution applied to their full salary.

"Where the wage of the member exceeds the wage ceiling notified by the Central Government, the contribution payable by the employer and the Central Government shall be limited to the amount payable on wages up to such wage ceiling," the notification clarifies.

Second, the EPS contribution comes out of the employer's 12%; the employee's own 12% continues to go entirely to the provident fund. For such members, more of the employer's money will now head to the pension fund.

Payoff at retirement

The monthly pension under EPS is calculated on a simple formula: pensionable wages multiplied by pensionable service, divided by 70. The maximum pensionable wage is limited to the notified wage ceiling per month as per Paragraph 11 of the scheme.

Calculation shows that for a member contributing at the full ceiling for 10 years, the pension could be about ₹3,571 a month at ₹25,000 ceiling, against ₹2,143 at the old limit. Over thirty years, the corresponding amounts are ₹10,714 and ₹6,429.

However, existing members should not assume that their entire pension will be recalculated at the new ceiling. EPS 2026 says that "the monthly pension of a member shall be determined on a pro rata basis for every wage ceiling period". This means service rendered under the ₹15,000 ceiling will be calculated at that level only, and service after the hike at ₹25,000 limit.