How to increase pension under Employee Pension Scheme (EPS): Are you eligible for pension under Employee Pension Scheme (EPS) of the Employee’s Provident Fund Organisation (EPFO)? You can increase your monthly pension amount, thanks to a Supreme Court decision of early this year. You may not be aware of the details of this decision for which the petitioner had to fight a long legal battle.
In April this year, the Supreme Court had upheld a Kerala High Court verdict on monthly pension from the Employees’ Pension Scheme 95 (EPS 95). The Kerala high court had scrapped a 2014 notification of the Employee Provident Fund Organisation (EPFO), asking the pension body to give full pension to EPS subscribers.
Earlier, the EPFO had capped the salary used for computation of pension at Rs 15,000/month. The EPS contribution was also capped at Rs 15,000. Hence, the EPS contribution limit was not 8.33% of the employer’s contribution but Rs 15,000/year. The SC order in April scrapped this rule.
In the wake of SC verdict, EPS subscribers can get a higher pension. Now, employees covered by EPFO are eligible for pension according to their full last drawn salaries (based on their actual basic pay plus DA). But for this, they will have to give up a chunk of their provident fund balance. Confused? Let’s explain this to you;
As per the Employee’s Provident Fund rules, a part of the employer’s contribution towards EPF is put in the EPS. Under the scheme, the pension of the subscriber depends on the number of years of his service and his last drawn salary.
The formula for driving the pension amount is:
Per month pension = Total years of job x last drawn salary divided by 70.
As per now-scrapped EPFO rule, salary considered for pension calculation was just Rs 15,000. So, even if you earned Rs 50,000, only rs 15,000/month would have been used for pension calculation. Suppose you worked for 30 years.
Then as per the formula mentioned above, your monthly pension would be:
30 x Rs 15,000/70 = Rs 6428/month.
However, in the wake of SC order, your pension can go up manifold. It will be calculated based on your actual last drawn Basic + DA. But if you want to get a higher pension, you will have to shift a chunk of your EPF to EPS account.
You can apply via your employer to the EPFO to deduct a sum retrospectively equal to 8.33% of your basic + DA towards EPS and shift extra amount from the PF account to the EPS retrospectively!