EPFO Higher Pension Scheme: Eligibility and application procedure

The Employees Provident Fund Organisation (EPFO) is a statuary body that manages the contributory Provident Fund (PF), pension, and insurance schemes in India. EPFO members are eligible to receive a pension after retirement.

At present, the contribution of employees and employers is 12% of the basic salary and dearness allowance to the EPF. Out of the employer’s 12% contribution, 8.33% will go towards the Employees’ Pension Scheme (EPS) and 3.67% towards the EPF.

In September 2014, an amendment was made to the EPS to put a cap on the EPS contribution. An EPF member can contribute 8.33% of basic salary and dearness allowance towards EPS, which is set at the maximum of Rs 15,000 even when the employee receives a high salary.

Employees can visit the official EPFO portal to apply for higher pension option jointly with their employers. The EPFO higher pension application deadline has been extended till July 11, 2023. Earlier, the deadline to apply for higher pensions under the Employees’ Pension Scheme (EPS) was extended till June 26, 2023. The EPFO has also given three more months to employers to submit wage details online by September 30, 2023.

 

EPF higher pension scheme

The pension scheme was introduced by the government in 1995 under Section 6A of the EPF Act. As per the Employees’ Pension Scheme, 1995 (EPS-95), the employer’s contribution of 8.33% must be towards the pension scheme. The maximum monthly pension was capped at Rs 5,000, or Rs 6,000. Hence, employer’s contribution must be 8.33% of Rs 5,000, which has been increased to Rs 6,500, towards the EPS pension scheme.

In March 1996, a provision was included in para 11 (3) of the EPS-95, which allowed the employer and employee to contribute 8.33% of actual salary, which is above the limit of Rs 5,000 or Rs 6,500, to the pension scheme. The higher salary would be considered a pensionable salary. The employees were given six months by the EPFO to file a joint option form for higher pension contributions to the scheme.

As per the amendment made by the government to the EPS-95 scheme in September 2014, the maximum pensionable amount was increased to Rs 15,000. Hence, employers are eligible to contribute 8.33% on a maximum of Rs 15,000 for those joining the EPF scheme after September 1, 2014, even if they draw a higher salary.

However, members who were part of EPS-95 or joined before September 1, 2014, are allowed to contribute 8.33% to the scheme on their actual salary (as against the cap of Rs 15,000) if they applied for a new joint option with the EPFO within six months, that is, February 28, 2015.

See also: What is EPF? What are PF interest rates in 2023?

 

Employee Pension Scheme: Eligibility

• An individual should be a member of the EPFO.
• One must have completed ten years of service and reached 50 years of age to be eligible for an early pension.
• For a regular pension, one should be 58 years old or above.
• In case of non-payment of pension for two years before 60 years of age, the pension amount will be receivable at an additional rate of 4% annually.

 

EPF higher pension: Eligibility

As per a circular issued by EPFO in December 2022, the eligibility criteria and application process for claiming a higher pension are mentioned below:

• The employees retired before September 1, 2014
• The employees opting for the joint option under para 11 (3) of EPS – 95 while being a member of EPS – 95
• Contribution of employees and employers to EPS on salaries above the limit of Rs 5,000/ Rs 6,500
• The EPFO declined the exercise of such an option

According to a Supreme Court judgement, employees who were part of the EPF before September 1, 2014, but still working or retired after 2014 were also eligible to claim a higher pension.

The eligibility for filing a joint option for receiving a higher pension are mentioned below:

• Employees who were members before September 1, 2014, continued to be members after that date
• Contribution of employees and employers to EPS on salaries above the limit of Rs 5,000 or Rs 6,500
• The employees and employers who were members of EPS-95 and did not avail of the joint option given under the deleted para 11 (3) of the EPS and amendment made in 2014

Employees who were members of EPS-95 and applied for the joint option as per the deleted para 11(3) of the EPS but did not file new joint option after the amendment of 2014 would not be allowed to claim a higher pension. The contributions of these employees to the pension scheme will be 8.33% on the maximum amount of Rs 15,000, irrespective of the actual salary amount.

 

EPF higher pension formula and calculation

The EPS pension formula is mentioned below:

Monthly Pension = Pensionable Salary X Pensionable Service/ 70

– Pensionable salary refers to an average of the latest 60 months’ salary.

– Pensionable service refers to the number of years contributions were made to the EPS account.

If an employee retires at 58 years after offering pensionable service of over 20 years, a weightage of two years will be added to the service period. The maximum limit on the pensionable service is 35 years.

Example:

Mr A has earned an average monthly salary of Rs 60,000 for the past five years and offered services for 25 years.  He retired at 58 years. Suppose he exercised the joint option to get a higher pension.

As per the formula, the monthly pension amount will be:

50000 x 27* /70 = Rs 23,142

*Note that additional two years have been added to the service period.

 

How to apply for a higher pension?

Employees are required to apply for the joint option, or higher pension claim application mentioned by the concerned Regional Provident Fund Commissioner (RPFC).

Employees who have retired before 2014 can apply for the higher pension claim online by visiting the official portal https://unifiedportal-mem.epfindia.gov.in/memberInterfacePohw/ or they can apply with the regional EPF offices as per the specified deadline.

• EPFO will digitally register the application and provide a receipt number. The applications will then be forwarded to the respective employers, which will be verified through e-sign or digital signature.
• The RPFC will convert all applications into e-files. The dealing assistant concerned will assess the papers and send the case to the section account officer, or supervisor.
• The account officer, or supervisor concerned will mark discrepancies after examining and sending them to the Assistant Provident Fund Commissioners (APFC)/RPFC-II.
• The APFC/RPFC – II will examine the case and share the higher pension decision with the applicants through post, e-mail, phone or SMS.

 

Documents needed to apply for higher EPS pension

EPFO has simplified the process for employees who do not have proof of joint request/ undertaking/ permission from the employer till date but are otherwise eligible. It has released a list of documents an eligible employee can submit with the joint pension application form to apply for a higher EPS pension if one cannot furnish joint form under para 26(6).

One can submit any of the following documents along with the joint pension application form:

• Wage details provided by the employer along with application for validation of option/ joint options
• Any salary slip/ letter from employer authenticated by employer
• A copy of joint request and undertaking from employer
• A letter from the PF office issued prior to November 4, 2022, showing PF contribution on higher wages

See also: EPFO releases list of documents needed to apply for higher EPS pension

 

FAQs

What is the monthly pension if you do not opt for a higher pension?

The pension amount is calculated on the average of 60 months’ average pensionable salary at the time of retirement. Suppose a person joined EPS at 25 years and retired at 58 years; he may get Rs 7, 071 as a monthly pension, which is calculated as Rs 15, 000 X 33 / 70.

What are the benefits of a higher pension scheme?

Employees who need a higher monthly pension but do not need a huge lump sum upon retirement can apply for the higher pension scheme. The contribution for this will increase the monthly pension and reduce the EPF lump sum provided upon retirement. One must note that the monthly pension amount is taxable. However, tax exemption is provided on the lump sum one receives after retirement.

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com