KEY HIGHLIGHTS
- The big question is answered: Does EPS earn interest or not?
- EPFO does not pay interest on pension funds; EPS works on a fixed formula.
- Talks of raising minimum pension to ₹7,500 surfaced, but the government said there is no such plan.
A lot of people assume that since their EPF earns interest, the pension part should earn interest too.
Sounds logical, right? But the reality is a bit different.
EPF earns annual interest, but EPS (Employee Pension Scheme) does not earn even a single rupee in interest.
Summary Table
| Feature | EPF | EPS |
|---|---|---|
| Interest paid? | Yes (annual rate) | No |
| Who contributes? | Employee + Employer | Only Employer’s 8.33% share |
| Minimum pension? | Not applicable | ₹1,000 per month |
| When do you get benefits? | On leaving job/retirement | After age 58 |
| Pension calculation | Not applicable | (Salary × Service) / 70 |
How EPS Works and When You Get Pension
EPS is a retirement pension scheme managed by EPFO.
It provides lifelong monthly pension to employees in the organised sector.
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From the employer’s 12% EPF contribution, 8.33% goes to EPS, which builds your pension fund.
Once you complete 10 years of service and turn 58 years old, you qualify for regular EPS pension.
If someone leaves the job early, they can either withdraw their EPS amount or opt for a reduced pension.
Does EPS Money Earn Interest?
Short answer: No.
The amount deposited in the EPS account does not earn interest.
EPS is a “Defined Benefit Scheme,” meaning your pension amount is calculated based on a fixed formula—not on how much interest you accumulate.
Pension Calculation Formula
Pension = (Pensionable Salary × Pensionable Service) / 70
The maximum salary considered is ₹15,000.
So, if someone works for 35 years, their approximate pension comes to ₹7,500 per month.
Will the Minimum EPS Pension Increase to ₹7,500?
For months, reports claimed that the government was planning to raise the minimum EPS-95 pension from ₹1,000 to ₹7,500.
Some even said the EPFO Central Board of Trustees might discuss it.
But the official word arrived in Parliament.
What the Government Said
On 1 December 2025, during the Winter Session of Parliament, the government confirmed:
There is currently NO plan to increase the minimum EPS pension.
The Labour Ministry said that increasing pension without a new funding model could put pressure on the fund’s long-term stability.
So for now, the ₹1,000 minimum pension stays unchanged.
Frequently Asked Questions
1. Does EPS earn interest like EPF?
No. EPS does not earn interest. Pension is calculated only through a fixed formula.
2. Is the EPS minimum pension increasing to ₹7,500?
Not at the moment. The government has clearly stated that there is no such plan right now.
3. Why doesn’t EPS earn interest?
Because EPS is a defined benefit scheme—your pension amount is fixed by formula, not by returns on investment.
