Employees’ Pension Scheme 2025: The Employees’ Provident Fund (EPF) is more than just a savings scheme—it’s a powerful vehicle for building long-term wealth, particularly for salaried professionals. Even with a monthly salary of ₹25,000, disciplined contributions and the magic of compound interest can build a retirement corpus nearing ₹70 lakh. Let’s break down how this works, explore the EPF pension formula, and learn how small, consistent savings can pave the way for a financially secure future.
What is EPF and how does it function?
The Employees’ Provident Fund (EPF) is a retirement savings scheme managed by the Employees’ Provident Fund Organization (EPFO). It’s mandatory for employees earning up to ₹15,000 per month, but higher earners can also opt in voluntarily.
Contribution Structure:
- Employee: 12% of basic salary
- Employer: 12% of basic salary, split as:
- 8.33% to EPS (Employees’ Pension Scheme)
- 3.67% to EPF
- Interest Rate: 8.25% (FY 2023-24), compounded annually
Thanks to the power of compounding, your money grows exponentially over time—especially if you start early and stay consistent.
EPF Growth for a ₹25,000 Salary
A 25-year-old starts contributing to the EPF with a basic monthly salary of ₹25,000 and continues doing so until the retirement age of 58, spanning a total of 33 years.
Assumptions:
- Monthly EPF Contribution: ₹3,000 (12%) + ₹917.50 (3.67%) = ₹3,917.50
- Annual Interest Rate: 8.25%
- Duration: 33 years
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Estimated EPF Growth:
| Year | Age | Total Contributions (₹) | Interest Earned (₹) | Total Balance (₹) |
|---|---|---|---|---|
| 1 | 26 | 11,750 | 484 | 12,234 |
| 5 | 30 | 58,750 | 16,411 | 75,161 |
| 10 | 35 | 1,17,500 | 81,213 | 1,98,713 |
| 15 | 40 | 1,76,250 | 2,07,457 | 3,83,707 |
| 20 | 45 | 2,35,000 | 4,48,613 | 6,83,613 |
| 25 | 50 | 2,93,750 | 8,36,971 | 11,30,721 |
| 30 | 55 | 3,52,500 | 14,16,140 | 17,68,640 |
| 33 | 58 | 3,87,750 | 22,99,250 | 26,87,000 |
Note: This represents only the EPF portion (excluding Employees’ Pension Scheme and Voluntary PF).
Employees’ Pension Scheme Formula:
Pension is calculated by multiplying the Pensionable Salary by the Pensionable Service, then dividing the result by 70.
- Pensionable Salary: Capped at ₹15,000/month
- Pensionable Service: Maximum of 35 years (33 years considered in this case)
- Pension Calculation:(₹15,000 × 33) ÷ 70 = ₹7,071 per month
Employees’ Pension Scheme Value Over Retirement (30 years):
| Age | Monthly Pension (₹) | Annual Pension (₹) | Cumulative Pension (₹) |
|---|---|---|---|
| 58–87 | 7,071 | 84,852 | 25,45,560 |
The Total Picture: EPF + EPS
By retirement:
- EPF Corpus: ₹44,41,440 (excluding earlier-stage balance + interest)
- Employees’ Pension Scheme (30 years): ₹25,45,560
Total Retirement Wealth = ₹69.87 lakh
Bonus: VPF – The Secret Weapon
Want to grow your retirement fund even faster? Enter the Voluntary Provident Fund (VPF).
VPF Benefits:
- Employees are eligible to contribute as much as 100% of their basic salary.
- Same 8.25% interest as EPF
- Tax benefits under Section 80C
- Government-backed safety
By contributing just an additional ₹2,000 per month to your VPF for 33 years, you could grow your retirement corpus by an extra ₹18–20 lakh.
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Tax Advantages of EPF
EPF falls under the EEE (Exempt-Exempt-Exempt) category:
- Contributions: Eligible for tax deduction up to ₹1.5 lakh per year under Section 80C.
- Interest Earned: Exempt from tax if the account is maintained for more than 5 years.
- Withdrawals: Tax-free after 5 years of continuous service
Additional Benefits of EPF/EPS
- Life insurance coverage under EDLI is available up to ₹7 lakh.
- Partial withdrawals are allowed for purposes such as marriage, education, or medical expenses.
- UAN enables account portability and online tracking
- Digital access via EPFO portal and UMANG app
Tips to Maximize Your EPF and Employees’ Pension Scheme Returns
- Start early to unlock compounding benefits
- Stick with employers offering EPF
- Use VPF to boost savings
- Avoid withdrawing EPF when changing jobs
- Update KYC, UAN, and nomination regularly
Final Word
Even on a modest salary of ₹25,000/month, your EPF contributions, Employees’ Pension Scheme, and voluntary savings can together create a robust retirement corpus of nearly ₹70 lakh. For salaried employees, the Employees’ Provident Fund (EPF) stands out as one of the safest and most rewarding long-term investment options.
