📢 EPFO Restores Higher EPS Pension Option: Who Qualifies and What It Means

G GOWTHAM
The Employees’ Provident Fund Organisation (EPFO) has clarified that it has reinstated the option to link your pension under the Employees’ Pension Scheme (EPS) to your actual full basic salary and dearness allowance (DA) for certain eligible members — a provision that had been discontinued in 2014.

🧾 What Was the Change and Why It Matters

Under the EPS‑95 pension scheme, a portion of the employer’s contribution (8.33% of basic pay + DA or ₹1,250) goes into your pension corpus. However, in September 2014, the government capped the pension‑able salary at ₹15,000 per month, regardless of your actual salary. This meant that even if you earned more than ₹15,000 (basic + DA), your pension was calculated only on that capped amount — limiting your monthly pension benefit.

Before 2014, eligible members could opt to contribute towards EPS based on actual salary (higher than the cap). This often resulted in much higher monthly pensions later in retirement.

The recent clarification restores that higher pension option for those who had already exercised it before the cap was introduced, resolving long‑standing confusion about pension entitlements.

👥 Who Qualifies for the Higher Pension Option

✅ Eligible Members

  • Members who chose the higher pension option before 1 September 2014 (under the old EPS rules) are eligible to benefit from the restored provision.
  • Their pension will be linked to the actual basic salary + DA on which they had opted to contribute earlier (instead of the capped ₹15,000).
  • This mainly includes long‑serving employees and those who opted for higher pension contributions (often in PSUs and government‑linked workplaces) before the 2014 ceiling.
❌ Who Will Not Benefit

  • Employees who joined the EPF/EPS scheme on or after 1 September 2014 and never opted for the higher contribution option are not eligible. Their pension continues to be calculated on the ₹15,000 cap.
  • Also, salaried employees whose employers did not approve their higher contribution option before 2014 typically cannot claim the restored benefit now. Employer consent remains important.
📌 How the Higher Pension Works

Under the restored option:

  • The EPS pension calculation will consider your actual basic salary + DA (as opted before 2014), not the ₹15,000 pensionable wage ceiling.
  • This may significantly increase your monthly pension compared to the standard EPS formula (which currently caps pension calculation at ₹15,000).
  • The requirement for employer’s agreement still applies — employees cannot unilaterally opt for this higher contribution without employer approval.
🧠 What This Means in Practice

✔ The move does not introduce a new benefit for all EPFO subscribers — it restores an older option for a specific group of pensioners who exercised it before 2014.
✔ It provides clarity and relief to eligible retirees who were in limbo due to the past pensionable wage cap and its impact on their pensions.
✔ For the majority of current subscribers (especially those who joined after the 2014 change), the standard pension rules (₹15,000 cap) still apply.

🔎 Why This Matters

Restoring the higher pension option helps clear confusion caused by the 2014 amendment and ensures that employees who made higher contributions based on actual salary are rightfully rewarded with proportionately higher pensions after retirement — rather than being limited by an outdated ceiling.

📌 Summary

  • EPFO has clarified and restored the higher EPS pension option for eligible members.
  • Only employees who opted for higher pension before 2014 benefit.
  • Pension calculations for these members will be based on actual salary + DA, not the standard ₹15,000 cap.
  • The restoration provides greater pension payouts for this limited group, but the general rules remain unchanged for newer subscribers.
 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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