The Employees’ Provident Fund Organisation (EPFO) on Wednesday released a set of Frequently Asked Questions (FAQs) on the issue of higher pension linked to actual salary. In a circular to its field officers, the EPFO stated that the pensionable formula for those opting for higher pension will be calculated as per para 12 of the Employees’ Pension Scheme (EPS) and that “the date of commencement of pension will determine the applicable formula for calculation of pensionable service, pensionable salary and pension”.
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For those who will retire in the future, say in 2030, the EPFO said the pension will be calculated based on the provisions of EPS, 1995 that will “exist as on the date of the commencement of pension”. The FAQs, however, did not state if there will be any change in the pensionable formula for those who retire in the future. People in the know said that there could be tweaks in the pensionable formula for those who retire in the future going ahead.
Giving example for those members whose date of commencement of pension is prior to 01.09.2014, the EPFO reiterated the pensionable salary will be calculated based on the average monthly pay drawn during contributory period of service in the span of 12 months preceding the date of exit from the membership of the pension fund. For those whose date of commencement of pension is on or after 01.09.2014, the pensionable salary will be calculated based on the average monthly pay drawn during the contributory period of 60 months preceding the exit from the membership of the pension fund. Arrears of pension will be paid to the pensioners in line with the existing income tax rules for tax deducted at source (TDS).
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The EPFO had kept the deadline to apply for higher pensions till July 11. Following this, it gave further time of three months to employers till September 30 and then another extension till December 31, while employees had time till July 11 to submit their applications.
Members of EPFO’s Central Board of Trustees welcomed the issuance of the FAQs. “If this was issued a few months back, it would have saved the confusion among the pensioners and also the EPFO officers. But, of course, it is always better late than never and I appreciate their action on this now,” K.E. Raghunathan, a CBT member representing employers said.
A total of 32,591 demand letters had been issued with the cumulative demand raised of Rs 1,974 crore till October 12 from the applicants who opted for higher pension under the EPS. The total number of applications for higher pension have totalled around 17.49 lakh.
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The Supreme Court in a ruling on November 4 last year upheld the amendments to the Employees’ Pension (Amendment) Scheme, 2014, providing another chance for employees who were existing EPS members as on September 1, 2014, to contribute up to 8.33 per cent of their ‘actual’ salaries — as against 8.33 per cent of the pensionable salary capped at Rs 15,000 a month — towards pension.
The pension fund comprises a deposit of 8.33 per cent of the employers’ contribution towards the PF corpus. Both employees and employers contribute 12 per cent of the employee’s basic salary, dearness allowance and retaining allowance, if any, to the EPF. The employee’s entire contribution goes to EPF, while the 12 per cent contribution by the employer is split as 3.67 per cent to EPF and 8.33 per cent to EPS. The Government of India contributes 1.16 per cent of an employee’s pension for those below the wage threshold. Employees do not contribute to the pension scheme.
