The Employees' Provident Fund Organisation (EPFO) has reinstated the old contribution rules for higher pensions in the Employees' Pension Scheme (EPS). This rule applies to employees who ... Read more

The Employees' Provident Fund Organisation (EPS) has reinstated the old rule for contributions to the Employees' Pension Scheme (EPS). This means that the old option of adding a higher pension to the full basic salary has been reinstated. This government move is expected to provide relief to some subscribers who previously opted for higher pension contributions. However, not everyone will benefit. Let's learn about this rule

Before 2014, EPFO had a rule regarding higher pension. According to the rule, employees could contribute their full basic salary and DA to the EPS for higher pension.

However, a salary limit was implemented in 2014. This rule was subsequently removed. In 2014, the EPFO imposed a maximum basic salary limit of ₹15,000. This means that even if your basic salary is ₹50,000, your contribution will still be based on the ₹15,000 limit.

New members after 2014 did not get the option of higher pension.

Due to the ₹15,000 limit, the minimum pension is ₹1,000 and the maximum is only ₹7,500. New employees joining the EPFO after 2014, whose basic salary and DA exceeds ₹15,000, cannot choose to have their pension calculated based on their actual basic salary.

This capping significantly reduced the potential pension benefits for EPFO subscribers whose basic salary and DA were more than Rs 15,000.

Who will benefit from EPFO's higher pension restoration?

The reinstatement of the old higher pension ( EPFO Pension ) rule applies only to employees who exercised the higher pension option before 2014. Therefore, only a limited number of employees will benefit. The reinstatement of the higher pension option will not apply to all employees.

Dr. Rahul Singh, Associate Professor at O. P. Jindal Global University, said, "This facility is not universal. Employees who did not previously opt for higher contributions or whose pensions were based on a salary limit of ₹15,000 will not benefit from this. While this move is positive for eligible members, continued efforts towards more inclusive and clear pension reforms will be necessary in the future."

How much money is deposited in EPS?

According to EPFO rules, both the employer and the employee contribute a maximum of 12% of their basic salary and DA to the Provident Fund (PF). A portion of the employer's contribution, 8.33% of their basic salary and DA or Rs 1,250, whichever is higher, goes into the employee's EPS corpus, which is used to provide a monthly pension upon retirement.

Pension is calculated on the basis of pensionable salary, hence most of the employees get very less monthly pension even if their basic salary is much more than Rs 15,000.

PC:Jagran