How a defined-benefit pension is calculated
Most DB pensions use a formula like this:
Example: 30 years of service × 2% per year × ₹10,00,000 final salary = ₹6,00,000/year (₹50,000/month, or 60% of final salary).
The replacement ratio (pension as a % of final salary) tells you how much of your pre-retirement income you'll get back. 60-80% is typically considered comfortable; below 50% often means your lifestyle will tighten in retirement.
Common benefit accrual rates
| Plan type | Accrual rate | 25 yr service |
|---|---|---|
| Standard private DB | 1.5% | 37.5% of final salary |
| Generous private DB | 2.0% | 50% of final salary |
| Government / public sector | 2.0-2.5% | 50-62.5% of final salary |
| Military / special forces | 2.5-3.0% | 62.5-75% of final salary |
FAQ
Is the pension adjusted for inflation?
Depends on the plan. Government pensions often include a cost-of-living adjustment (COLA). Private DB plans are more commonly fixed. This calculator shows the nominal pension in rupees today; to get real (inflation-adjusted) purchasing power, discount by expected inflation.
What is vesting?
Vesting is the minimum service period required to qualify for a pension. Typically 5-10 years. Leave before vesting and you may get back only your own contributions (if any), not the pension.
Can I take a lump sum instead?
Many plans offer a commuted-value lump sum or a partial commutation. The lump-sum value is the present value of expected future payments, discounted at an assumed rate.