The Employees’ Provident Fund Organisation (EPFO) has announced the method of computing pension on higher salary, instead of the statutory limits.
This will be applicable to those who opt for a higher pension on actual salary instead of the statutory limit of Rs 15,000 under the Employees Pension Scheme (EPS), 1995. The higher pension will be approved after EPFO’s field officers verify the details submitted jointly by employers and employees.
For those who retired before September 1, 2014, the pension will be calculated on the basis of average monthly pay drawn 12 months prior to retirement (or exit from the pension fund).
In the case of those who retired or will retire post this date, the pension will be calculated on the basis of average monthly pay during the 60 months immediately preceding the retirement. At present, it is calculated as pension = pensionable salary (average of last 60 months’ salary) x number of years of contribution / 70.
Also read: Applying for higher EPFO pension? Key factors you must consider
June 26, the deadline for filing joint applications
The Supreme Court in its order in November 2022 directing the retirement funds body to enable higher pension option had allowed it to retain the right to revise the formula to compute pension.
For employees, the deadline for choosing the higher pension option under the Employees’ Pension Scheme (EPS) 1995 is June 26, which was extended from May 3 earlier. It will then have to be validated by the employer, followed by EPFO’s field officers taking it up for assessment. They will verify the uploaded data and documentation and, they will have to do so within 20 days of having received the application.
Also read: Deadline for choosing higher pension option extended to June 26: Your key questions answered
Check your eligibility
Employees who were members of EPFO and Employees’ Pension Scheme (EPS), prior to September 1, 2014, and who continue to be in service but had missed choosing the higher pension option earlier can apply for a higher pension. Those who retired before this date and had signed up for the higher pension option will have to validate the information.
If you decide to opt for a pension on your actual, and not statutory salary of Rs 15,000, you will have to make the decision to file an application through the online facility on the EPFO’s member portal.
At present, pension is calculated on the statutory wage ceiling of Rs 15,000. Out of your employer’s contribution, Rs 1,250 (8.33 percent of Rs 15,000) goes towards EPS. This amount joins the pool created under EPS to pay regular pension income to member-employees with at least ten years’ service and their dependent family members.
You can, however, now choose to direct 8.33 percent of your actual salary towards the pension pool, translating potentially into a higher pension post-retirement, thanks to the Supreme Court verdict.
In addition, 1.16 percent from your employer’s contribution will also flow into EPS, with the balance 2.51 percent being directed to your EPF.
In case you discover errors in your application after filing your application to claim a higher pension, you can delete and submit it again. However, this will not be allowed if your employer has already validated the application.
Next, the EPFO officers will evaluate and approve your application to pave the way for a higher pension.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
