hi hello dear friends as per provident fund act how to calcultae pension if some one can explian me with a example i will be happy . regards VINAY
From India, Hyderabad
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24From India, Hyderabad
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We couldn't really find much on this subject, but we found some articles which you may find useful in this area.
SOCIAL SECURITY AND PENSIONS IN INDIA <link updated to site home> (Search On Cite | Search On Google) {PDF}
A Consolidated Model of Pensions for India <link updated to site home> (Search On Cite | Search On Google)
Maybe someone who has worked on this will be able to give a better idea of how the pension is calculated.
From India, Gurgaon
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SOCIAL SECURITY AND PENSIONS IN INDIA <link updated to site home> (Search On Cite | Search On Google) {PDF}
A Consolidated Model of Pensions for India <link updated to site home> (Search On Cite | Search On Google)
Maybe someone who has worked on this will be able to give a better idea of how the pension is calculated.
From India, Gurgaon
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Hi Vinay,
With regards to the Employees' Provident Fund and Miscellaneous Provisions Act of 1995, the formula for calculating PF pension is as follows:
PF pension = pensionable salary * pensionable service / 70
Thanking you and best wishes,
Antony Prakash.K
From India, Madras
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With regards to the Employees' Provident Fund and Miscellaneous Provisions Act of 1995, the formula for calculating PF pension is as follows:
PF pension = pensionable salary * pensionable service / 70
Thanking you and best wishes,
Antony Prakash.K
From India, Madras
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Hi! Pensions are normally defined by law, especially concerning social security, retirement benefits, and other mandatory contributions imposed on employees by governments. It is different from a separation or retirement fund, which is computed based on the number of years of service of the employee. Of course, an employee's separation benefit can be received like a pension when the employee opts to receive it in installments rather than as a lump sum amount.
In the absence of laws that provide guidelines on the matter, a pension can be designed using life insurance models. Under the life insurance model, a pension is seen as a replacement income when the person has retired. As such, one can be said to have an adequate pension when the previous employment income is continuously received by a retired employee after retirement until death.
The critical question is: how do you calculate the aggregate amount needed and its cost?
The aggregate amount can be computed as follows:
LAST MONTHLY Salary X 12 months X expected number of years to live after retirement
(Example: US $2,000 X 12 X 10 years = US $240,000.00)
The US $240,000.00 is the aggregate amount that will be targeted. In insurance language, this becomes the FACE VALUE of the employee's insurance that will have to mature when the employee retires. With this amount, even without considering its annual interest earned, the employee will be guaranteed a monthly income of US $2,000.00 every month for TEN years. With interest considered, this fund can even extend the life of the pension to another year or two.
Now, what is the cost?
The cost of this pension fund (US $240,000.00) in insurance terms is equivalent to the monthly INSURANCE PREMIUM that the insurance company will ask you to pay. If the PENSION PLAN or program is "NOT insurance-based," then this amount will have to be saved (with interests factored) by the employee and/or the company under a "trust fund." This may be "contributory or non-contributory" in nature, depending on the company's policy.
When a company does not have money, the insurance-based model is best. The problem is whether the company is willing to buy a life insurance benefit of such a huge face value for its employees? The normal corporate insurance plans for employees are "group term life," whose premium cost is less than half of full life plans. The problem with term insurance is: it has no CASH VALUE that can mature when the employee retires.
Best wishes.
Ed Llarena, Jr.
Managing Partner
Emilla Consulting
*helps improve corporate governance in Asia and the Pacific Region*
From Philippines, Parañaque
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In the absence of laws that provide guidelines on the matter, a pension can be designed using life insurance models. Under the life insurance model, a pension is seen as a replacement income when the person has retired. As such, one can be said to have an adequate pension when the previous employment income is continuously received by a retired employee after retirement until death.
The critical question is: how do you calculate the aggregate amount needed and its cost?
The aggregate amount can be computed as follows:
LAST MONTHLY Salary X 12 months X expected number of years to live after retirement
(Example: US $2,000 X 12 X 10 years = US $240,000.00)
The US $240,000.00 is the aggregate amount that will be targeted. In insurance language, this becomes the FACE VALUE of the employee's insurance that will have to mature when the employee retires. With this amount, even without considering its annual interest earned, the employee will be guaranteed a monthly income of US $2,000.00 every month for TEN years. With interest considered, this fund can even extend the life of the pension to another year or two.
Now, what is the cost?
The cost of this pension fund (US $240,000.00) in insurance terms is equivalent to the monthly INSURANCE PREMIUM that the insurance company will ask you to pay. If the PENSION PLAN or program is "NOT insurance-based," then this amount will have to be saved (with interests factored) by the employee and/or the company under a "trust fund." This may be "contributory or non-contributory" in nature, depending on the company's policy.
When a company does not have money, the insurance-based model is best. The problem is whether the company is willing to buy a life insurance benefit of such a huge face value for its employees? The normal corporate insurance plans for employees are "group term life," whose premium cost is less than half of full life plans. The problem with term insurance is: it has no CASH VALUE that can mature when the employee retires.
Best wishes.
Ed Llarena, Jr.
Managing Partner
Emilla Consulting
*helps improve corporate governance in Asia and the Pacific Region*
From Philippines, Parañaque
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Hi,
Please clarify for me the formula to calculate the pension:
The formula is: (pensionable service x pensionable salary)/60. This means that on retirement, if you are receiving Rs. 25,000, your pensionable salary will be Rs. 12,500. Can you please clarify my doubt?
Thanks & regards,
Manish
From India, Delhi
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Please clarify for me the formula to calculate the pension:
The formula is: (pensionable service x pensionable salary)/60. This means that on retirement, if you are receiving Rs. 25,000, your pensionable salary will be Rs. 12,500. Can you please clarify my doubt?
Thanks & regards,
Manish
From India, Delhi
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Hello Manish, Hope my explanation below may help you.
1. Pensionable Salary stands for Average Basic + D.A. salary of the last 60 months.
2. Pensionable Years are the number of years one has contributed to the Pension (A minimum of 10 years is required).
3. The formula for calculating pension is (Pensionable Salary x Pensionable Years / 70).
Now, assuming in your case your Pensionable Salary is Rs. 25,000/- and Pensionable Years are 10, the amount that you will earn as Pension is: 25,000 x 10 / 70 = Rs. 3,571/-
Thanks,
Sagar Gulani
From India, Surat
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1. Pensionable Salary stands for Average Basic + D.A. salary of the last 60 months.
2. Pensionable Years are the number of years one has contributed to the Pension (A minimum of 10 years is required).
3. The formula for calculating pension is (Pensionable Salary x Pensionable Years / 70).
Now, assuming in your case your Pensionable Salary is Rs. 25,000/- and Pensionable Years are 10, the amount that you will earn as Pension is: 25,000 x 10 / 70 = Rs. 3,571/-
Thanks,
Sagar Gulani
From India, Surat
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Dear Sagar Gulani, If there is service before 16.11.1995, there will be addition in pension. Abbas.P.S
From India, Bangalore
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From India, Bangalore
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