The Employees’ Provident Fund Organization (EPFO) has implemented a new method for calculating higher pensions based on actual salary.
This method applies to EPFO subscribers who have requested an increase in their pension based on their actual salary.
Currently, most employees’ pensions are calculated using the EPS limit of Rs 15,000 under the Employees Pension Scheme (EPS) of 1995.
EPFO field officers will review applications submitted by employers and employees and approve them if found to be correct.
How Pension is Calculated under the New Method
Under the new method, pension calculations differ depending on the retirement date.
For employees who retired before September 1, 2014, their pension will be calculated based on the average monthly salary of the 12 months preceding retirement.
For employees retiring after this date, the pension will be based on the average monthly salary over the 60 months preceding retirement.
The formula for calculating the pension is as follows: Pension = Pensionable Salary (Average of the last 60 months’ salary) x Number of years of contribution / 70.
Application Deadline and Process
Employees who were members of EPFO and EPS before September 1, 2014, and are still in service but missed the opportunity to apply for enhanced pension can now apply.
The Supreme Court’s November 2022 order extended the application deadline to June 26 (previously May 3).
Applicants must apply through the member portal, and their employers will need to approve the application.
EPFO field officers will investigate the applications and review the data and documents uploaded to the EPFO website within 20 days of receiving the application.
Contribution and Benefits
To receive a pension based on actual salary instead of the fixed limit of Rs 15,000, applicants need to apply through the EPFO member portal. Currently, the pension calculation uses the Rs 15,000 limit.
From the employer’s contribution, Rs 1,250 (8.33% of Rs 15,000) is allocated to EPS, which adds to the pension pool.
Applicants can contribute 8.33% of their actual salary to the pension pool to increase their pension amount.
Additionally, the employer contributes 1.16% of the employee’s salary to EPS, while the remaining 2.51% goes to the EPF account.
Correcting Mistakes and Reapplication
If any mistakes are found in the application after applying for higher pension, applicants can delete the old application and submit a new one.
However, if the employer has already validated the application, reapplication may not be possible.
