If you are employed in a government or private organization, a certain amount of your salary is deducted monthly to contribute to the Employees’ Provident Fund (EPF).
By contributing continuously for 10 years, you secure your future and become eligible for a pension from the Employees’ Provident Fund Organization (EPFO) after retirement, ensuring a financially stable post-employment life.
This pension is usually received at age 58 and is calculated based on the member’s pension service.
However, the EPFO Pension offers you the flexibility to choose when to start receiving your pension, either before or after the age of 58, giving you control over your retirement plans. Let’s explore the rules related to these options.
You can apply for an early pension only if you are between 50 and 58 years old. However, the pension amount will be reduced if you choose an early retirement.
Your pension will be reduced by 4% for each year before the age of 58 in which you apply for retirement.
For example, if you are supposed to receive a pension at 56, your pension amount will be reduced by 8%. You will receive 92% (100% – 8%) of your basic pension amount.
Claiming an early pension is straightforward. You just need to fill out a composite claim form and select the Form 10D option for the initial pension, which gives you confidence that your request is being handled efficiently.
If an EPFO member continues to work beyond the age of 58, they can defer their pension for another two years until the age of 60 and continue contributing to the pension fund.
In this case, the employee will receive a higher pension. According to the rules, the pension increases by 4% every year after the age of 58.
So, if an employee retires at 59, they will receive an additional 4% in pension; at 60, they will receive an additional 8%.
If your employment period is less than 10 years and you have not contributed to EPFO, you are not eligible for the pension.
In this case, you have two options. First, you can withdraw the PF and pension amounts if you do not intend to work. The second option is to obtain a pension scheme certificate if you plan to re-enter the workforce.
When you start a new job, you can use this certificate to link your previous pension account to the new job. This can help cover the 10-year employment gap, making you eligible for the pension at 58 in your new job.