You have time till 11 July to opt for higher pension: All you need to know

The deadline to apply for higher EPS pension has been extended to July 11, 2023 from June 26, 2023. Subscribers should use the additional time to take a well-considered decision regarding whether to go for this option or stay with the current one that offers a higher lump sum from Employees’ Provident Fund (EPF) with lower pension.

Point to note: Pension from EPS will be taxable at slab rate, reducing the post-tax income for people who remain in the higher tax brackets after retirement.

July 11 will be the last date for employees to submit their joint application form for higher pension from EPS. This is the second extension of the deadline for applying for a higher pension. Earlier, it was extended from May 3, 2023, to June 26, 2023.

The last opportunity of 15 days is being given to remove any difficulty faced by the eligible pensioners/ members, the Employees' Provident Fund Organisation said in a statement. The employers will be given another three months  for uploading wage details online.
 

Any eligible pensioner/member who on account of any issue in updation of KYC, faces difficulty in submitting online application for validation of option/joint option can immediately lodge such grievance on EPFiGMS for resolution. The grievance may please by submitted by selecting the grievance category of 'Higher Pensionary benefits on higher wages'. This will ensure proper record of such grievance for further action.

" This extension is a welcome move for both employees and employers as it will give them more time to understand the process and make the necessary arrangements. However, as this was a very short extension, the employees and employers both should not delay taking the requisite steps," said Sandeep Bajaj, Managing Partner, PSL Advocates & Solicitors.

Clarity on critical aspects
"The EPFO has also clarified on various critical aspects, such as the method of computing pension, the timeline for depositing funds, and the way joint option applications will be processed, which would help members re-evaluate and make an informed decision. On the other hand, representations were also filed with the EPFO to extend the time frame for employers to approve these applications. This was due to the challenges encountered by employers when submitting wage details for each pensioner / member for the entire term of employment. The EPFO has evaluated these requests and given companies a three-month extension to submit salary details (i.e., until September 30, 2023). This provides a much-needed respite to employers who were previously confronted with practical difficulties in compiling and filing wage details for the whole period of employment," s.aid  Puneet Gupta, Partner, People Advisory Services, EY India.

Formula for calculating higher pension

The formula for calculating EPS pension is pensionable salary (average of basic salary plus dearness allowance over 60 months before retirement) into years of pensionable service, divided by 70. Suppose that a person joined employment on April 1, 2000 and will retire on March 31, 2030. His joining salary is Rs 15,000 per month and grows 8 per cent annually until retirement. His pension under the old scheme would be Rs 4,864. Under the higher pension scheme, it will rise to Rs 57,169.

Who is eligible to apply for higher pension?

According to the Supreme court ruling, only employees who have made contributions to the provident fund based on their actual salary, which exceeds the statutory limit of salary (Rs 15,000) for coverage under the EPF, are eligible to claim the higher pension offered by the EPS. Moreover “you should have contributed more than the prevalent wage ceiling of Rs 5,000 or Rs 6,500 and you should not have exercised the joint option with your employer for such a higher contribution.

Eligible employees have to produce the following documents to apply to the scheme:

Universal Account Number (UAN) for existing employees

Pension Payment Order (PPO) in case of retired employees

Mobile number linked with the Aadhaar number

Member's Aadhaar number, name, and date of birth should be available in the EPFO's records

How to avail of higher pension scheme?

EPFO has provided an online link on the Member Sewa portal for eligible employees to apply for higher EPS pension.

Step 1: Go to Member e-Sewa portal - https://unifiedportal-mem.epfindia.gov.in/memberinterface/. There, you will find an option for "Pension on higher salary: Exercise of joint option on or before May 3, 2023". Click on this option.

Step 2: A new homepage will open. Select "Application form for joint options - Joint options under erstwhile para 11 (3) and para 11 (4) of EPS 1995 for employees who were in service prior to 1st September 2014 and continued to the in service on or after 01.09.2014 but could not exercise joint option under the erstwhile provision to para 11 (3) of EPS 1995 to be exercised on or before last date."

Step 3: Enter the required details i.e., UAN, Name, Date of birth, Aadhaar number, Aadhaar linked mobile number, and captcha. Click on "Get OTP". A one-time password will be sent to your Aadhaar-linked mobile number.

Step 4: Once the OTP is entered, you will be required to validate your details.

Step 5: Ensure that all the details mentioned in the form are correct. Click on "Submit" for the final submission of the application.

After successfully submitting the application form, you will receive an acknowledgment. Save it for future reference.

What are the guidelines?

In a notification dated May 3, the government announced new guidelines regarding contributions towards an additional pension. According to the notification, members who choose to contribute towards this pension scheme will now receive an increased employer contribution of 9.49%. This contribution is calculated by adding 8.33% and 1.16% to the PF wages. However, it’s important to note that this enhanced contribution will only be applicable for amounts exceeding the PF threshold of Rs 15,000. Earlier, EPFO had imposed this requirement of paying additional contributions on the pensioners. 

Should you opt for higher pension?

" There are both pros and cons to applying for the higher pension scheme. One of the pros is that the Employees who apply for the same will receive a higher pension after retirement, however, on the flip side the Employees will have to pay additional 1.16% of the salary towards contribution, which means their take-home salary will be slightly lower," said Sandeep Bajaj, Managing Partner, PSL Advocates & Solicitors.

Ultimately, the decision of whether or not to apply for the higher pension scheme is a personal one. Each employee should weigh the pros and cons carefully and make the decision which is best for him.