EPFO brings back higher pension: Is your retirement payout about to jump?

Move restores pre-2014 higher pension route, but only for employees who had opted earlier with employer

A small group of Employees’ Provident Fund Organisation (EPFO) members may see relief on their pension calculations after a reported clarification that restores the pre-2014 option to link pension contributions to full basic salary.

 

According to a report by The Times of India, EPFO has reinstated the earlier provision that allowed certain employees to contribute to the Employees’ Pension Scheme (EPS) on their actual basic salary plus dearness allowance (DA), instead of being restricted to the statutory wage ceiling. The development has since been picked up by other media outlets.

 

However, there is no publicly available circular or notification on the official website of the Employees’ Provident Fund Organisation as of now confirming this change.

 

What changed in 2014?

On September 1, 2014, EPFO capped the pensionable salary at Rs 15,000 per month (basic plus DA). This effectively limited the maximum EPS pension to Rs 7,500 per month, regardless of how high an employee’s actual salary was.

 

Before this amendment, employees had the option to contribute towards EPS on their full basic salary. Many public sector undertaking (PSU) employees exercised this option, resulting in significantly higher pensions — in some cases close to half of their last drawn basic pay.

 

After the 2014 amendment, this higher contribution route was discontinued, leading to years of confusion, especially for those who had opted earlier.

 

What is being “restored”?

According to the ToI report, officials have clarified that this is not a new benefit but a restoration of the earlier provision. The reported relief applies only to:

 

·  Employees who had opted for higher pension contributions before September 1, 2014

 

·  Cases where the employer agrees to continue making higher contributions

 

It does not automatically apply to all EPFO members. New employees who joined after September 2014, or those who never exercised the higher option earlier, are unlikely to benefit.

 

How EPS contributions work?

Under EPF rules:

 

·  Both employer and employee contribute 12 per cent of basic salary plus DA to the provident fund.

 

·  Out of the employer’s 12 per cent share, 8.33 per cent (subject to the wage ceiling) goes into EPS.

 

·  The current pensionable salary cap remains Rs 15,000.

 

Since pension is calculated on pensionable salary, most private sector employees continue to receive relatively modest monthly pensions despite earning much higher basic pay.

 

What should subscribers do?

Given the absence of an official circular, employees who believe they are eligible should:

 

·  Check with their employer’s HR department

 

·  Contact their regional EPFO office

 

·  Monitor updates on the EPFO website

 

For now, the reported move appears narrowly targeted and is unlikely to alter pension outcomes for the majority of EPFO subscribers.