Learn How To Calculate Pension After Retirement

How Much Will You Get From Your Pension After Retirement?

For most people, their greatest source of income after retirement will be the monthly income from their pension plan. For 30 years, you rolled up your sleeves and worked long hours to build a healthy nest egg for you and your family. You’ve lived frugally and saved what you could on the side. 

After years of setting aside money for these golden years, it’s finally time to reap the benefits. But how much will it be? Let’s take a quick look at some ways you can get an idea of how much money you’ll receive from your pension and how to go about getting that estimate.


What is a Pension Calculator?

A retirement planning calculator helps you figure out how much money you’ll need to retire. It will also tell you how much you should save every month to be able to reach that goal. Typically, a pension calculator may have the following parameters involved: 


  • Personal Details – It includes basic details like your date of birth and the expected age of retirement 
  • Savings Details – It requires you to fill in the amount of money you’re currently able to save annually 
  • Income Details – it involves details like your current annual salary and income sources 


Depending on your input for the aforementioned details, an online pension calculator helps you know about your pension requirement and provides insights on the amount of money you need to save to reach your required level of pension. 

Keep in mind that most of the pension calculator tools allow you to specify the expected growth of your annual income. Moreover, you may also get recommendations for the best pension plan based on your preferences. 

Why Should You Use a Pension Calculator?

If you’re concerned about your life after retirement, then calculating your pension is certainly a crucial thing for you. A pension calculator can prove to be extremely beneficial to you as it allows you to map your finances efficiently. Here’s why should you use a pension calculator: 


  • Know How Much You Need for Retirement


Everyone’s financial background is different and they need varying amounts of money to sustain a comfortable lifestyle after retirement. To know how much money you may require based on your current financial condition, a pension calculator comes out to be very handy. 


  • Know How Much You Need to Invest 


Once you know the required pension amount, you should also know about how you plan to achieve this figure. That’s when a pension calculator comes into play. It allows you to know the required amount of money you need to invest to be able to achieve your desired pension amount. 


How To Use a Pension Calculator? 

As a pension calculator is a website-based tool, you simply need a browser and internet connection to be able to use it. Here’s how to calculate your pension with the help of a pension calculator tool available online: 


  • Fill your date of birth in the pension calculator to allow the tool to specify your current age
  • Specify your preferred age at which you would like to retire from work 
  • Enter your annual income and any additional sources in the respective fields 
  • Provide details about the money you can save every year from your earnings 
  • Choose the post-retirement accommodations available at your disposal (rented or owned) 


Once you’ve filled in all the required details, you can also specify the assured growth value as per the retirement plans that you wish to zero in. This will provide you with an adequate pension value and the investment you need to make to achieve it. 


How to Calculate Pension in EPS 


To calculate the monthly pension that you receive through an employee pension scheme, you need to use the following formula: 

Monthly pension amount= (Pensionable salary X Pensionable service) /70

Here’s an individual breakdown of the required details: 


  • Pensionable Service


The pensionable service is the number of years up to which you make contributions to an EPS account. As per legal mandates, the pensionable service is required to be rounded to the nearest year. In simple terms, a service served for six months will be considered as a year while less than six months will not be considered at all. 


  • Pensionable Salary 

The pensionable salary is the total average of the salary you’ve drawn in a specified timeframe. Earlier, only the salary for the last 12 months used to be considered. However, as per the recent changes, now 60 months of salary is considered to take out the average. There’s still a clarification awaiting from the employee pension scheme organization. 


What’s The Minimum and Maximum Amount of Pension in EPS?

In an Employee Pension Scheme, the minimum pension amount required to be provided to a person in his/her retirement is Rs. 1000 per month. The maximum amount of pension that one can receive through this scheme is Rs. 7,500 per month, depending on the contributions you make towards the scheme. 


Calculation of Early Pension 

The Employee Pension Scheme also provides early pension starting from the age of 50 years. In such a case, the pension amount will keep reducing at a rate of 4% each year until it reaches 58 years of age. For example, if you choose to receive an early pension at the age of 51 years, the pension will keep reducing every year by 4% with a total deduction of 28% by the time it reaches 58 years of age. 

Final Words

Retirement is one of the most comfortable phases of life. However, it can be pretty difficult if you don’t have any income sources available. By investing in a pension plan, you can make sure that you live a comfortable life after you’re no longer receiving a monthly income. Therefore, it is essential to calculate your pension and know how much you require to sustain a proper lifestyle. 


Leave a Comment