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SC permits pension contributions on higher salary. What’s in store for employers and employees?

While higher pension contributions would mean higher pensions for the employees, they should keep their current age, stage of employment, risk appetite, health condition, cash flow requirements, and tax impact, in perspective while deciding on whether or not to contribute to the EPS scheme on higher salary.

December 22, 2022 / 03:58 PM IST

The Supreme Court ruling on higher pension contributions has attracted considerable discussion. Does this bring cheer to members of the Employees’ Pension Scheme (EPS)? What is the ruling all about?

Employees contribute to provident fund (PF) at 12 percent of pay on a monthly basis with a matching contribution by the employer. Out of the employer contribution, 8.33 percent of pay is diverted to EPS.

However, pay for this purpose is capped at the statutory wage ceiling (currently Rs 15,000 per month). In other words, the pension contribution per month does not exceed Rs 1,250 p.m.

While the scheme provided an option for employees to contribute on higher pay to the EPS scheme, in practice not many employees had opted for the same.