EPFO pension or withdrawal—which decision is right for you? Learn about the 10-year rule, new changes in 2026, the pension calculation formula, and the benefits of early and deferred pensions. A wrong decision can reduce your retirement savings.
For a salaried person, the thought of retirement often brings both relief and worry. A part of your hard-earned money is deposited into EPFO every month, but when it comes to withdrawing this money or choosing a pension, most people get confused. Should you withdraw all the money right after leaving your job or wait for a pension until age 58? Amid the new changes in 2026 and Supreme Court directives, it's crucial to understand that one wrong decision can reduce your savings.
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The line between pension and withdrawal: The 10-year rule
According to EPFO rules, pension eligibility depends entirely on your 'Pensionable Service'. If your total service is less than 10 years, you are not entitled to a monthly pension. In this case, you can withdraw your pension amount as a lump sum using Form 10C.
But as soon as you complete 10 years of service, you automatically become eligible for a pension. After this, you cannot withdraw a lump sum from the pension fund; you will only receive a monthly pension after the age of 58.
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New changes in 2026: Salary limit may increase
The government is preparing for major changes to EPFO rules in 2026. Currently, the wage ceiling for EPF is ₹15,000, which may be increased to ₹21,000 or ₹25,000. This move will expand social security for millions of private-sector employees and increase future pension amounts. The government is also considering raising the minimum monthly pension from ₹1,000 to ensure a dignified life for employees after retirement.
Pension calculation: How is your money determined?
The pension amount depends on your length of service and your average salary. For those retiring after September 1, 2014, the pension is calculated based on the average salary of the last 60 months.
The pension formula is: Monthly Pension = (Average Salary × Years of Service) / 70
For example, if your average salary is ₹15,000 and you have served for 25 years, your pension will be around ₹5,357 per month.
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Warning! Withdrawing money early can be costly
Many employees withdraw their pension money when changing jobs, but this can be a losing deal. If you withdraw before 10 years, EPFO uses a 'Proportion Factor'. This means you might get less than your total contribution, based on a set formula. Experts advise getting a 'Scheme Certificate' instead of withdrawing, so your service years keep adding up for a better pension later.
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The age game: Early pension or more pension?
EPFO gives you the freedom to choose your pension based on your needs:
Normal Pension: Starts at age 58.
Early Pension: You can take it after age 50, but your pension will be reduced by 4% for each year you start early.
Deferred Pension: If you delay your pension past 58, up to age 60, your pension increases by 4% to 8% each year.
EPFO is not just a withdrawal scheme; it's a safety net for you and your family's future. The family pension in case of an employee's death is a major benefit. So, in your financial planning, consider tomorrow's pension, not just today's withdrawal. Always check your status on the official EPFO portal or UMANG app before making any big decisions.
