EPFO Higher Pension Calculation Formula 2023: Employees, who have been EPF members from before 1st September 2014, will get an option to contribute 8.33% of their actual Basic+DA payments towards EPS.
EPFO Higher Pension Calculation 2023: If you are an EPF member from before 1st September 2014, you will soon have the option to contribute 8.33% of your Basic Salary and Dearness Allowance (if applicable) towards Employee Pension Scheme (EPS). More details about this option and an online link to apply for higher pension will be functional soon one the website of Employees Provident Fund Organisation (EPFO). (Also read: EPFO higher pension deadline extended)
At present, an employee’s contribution towards the EPF account is capped at 12% of the Basic Pay+Dearness Allowance. An equal 12% contribution is made by the employer, of which 8.33% goes towards EPS and 3.67% towards the employee’s EPF account. The employer’s 8.33% contribution is subject to the statutory wage ceiling of Rs 15,000, which means only Rs 1250 (8.33% of Rs 15,000) goes to your EPS account every month.
In accordance with a Supreme Court judgement, employees, who have been EPF members from before 1st September 2014, will get an option to contribute 8.33% of their actual Basic+DA payments towards EPS. That said, the following are some illustrations to understand how much more pension you can get by opting for the EPFO higher pension option (Also Read: 5 reasons to avoid higher pension)
Example: If Basic Pay is Rs 40,000
What is happening now: 12% of your Basic Pay (Rs 4800) goes to the EPF account every month. Of the employer’s contribution, which is also equal to 12% of your Basic Salary, Rs 1250 goes towards EPS while the remaining Rs 3550 goes to your EPF account.
What will happen if you opt for the higher pension: As Supreme Court has said that employees will get a chance to opt for a higher EPS contribution based on actual pay, 8.33% of your Basic Pay, i.e. Rs 3332 can go towards EPS. But there is a catch here.
If you opt for the higher pension option then the EPFO will retrospectively deduct the amount from your PF account towards EPS from your joining date or November 1, 1995, whichever is later.
Also Read: 5 reasons to apply for higher pension
How much pension can you get: The formula for calculating EPS pension is “Pensionable Salary X Pensionable Service)/70”
If you don’t opt for the higher pension: The EPS pension is calculated on the average of 60 months’ average pensionable salary at the time of retirement. For example, if you joined EPS at the age of 25 and retired at age of 58 then you may get Rs 7071 as a monthly pension [(Rs 15000×33)/70].
If you opt for the higher pension: In case you opt for the higher pension, then the pension to be provided to you at the time of retirement will be calculated on the basis of your actual Basic Salary plus Dearness Allowance (if applicable). For example, if your average pensionable salary (Basic+DA) for the past 60 months is Rs 40,000 at the time of retirement, then the pension would work out to be Rs 18,857 [(Rs 40000×33)/70].
Also Read: Who should apply for higher pension and who should not
If the pensionable salary is Rs 80,000 then you may be eligible for a pension of Rs 37,714 [(Rs 80000×33)/70].
Point to note: More clarification on the calculation of higher pension is expected from EPFO. The above is based on the assumption that the pension calculation formula remains unchanged. However, you should wait for the EPFO circular on pension calculation to get a clear idea of how much pension you can get by opting for higher pension)
Alright, buckle up! I'm about to lay down some knowledge on EPFO and the higher pension calculation formula. The Employees' Provident Fund Organisation (EPFO) has introduced a new option for EPF members who have been part of the scheme since before September 1, 2014. This option allows them to contribute 8.33% of their actual Basic+DA payments towards the Employee Pension Scheme (EPS).
Currently, employees contribute 12% of their Basic Pay+Dearness Allowance to the EPF account, with an equal 12% contribution from the employer. Out of the employer's contribution, 8.33% goes towards EPS, subject to the statutory wage ceiling of Rs 15,000. Only Rs 1250 (8.33% of Rs 15,000) goes to the EPS account monthly.
Now, thanks to a Supreme Court judgment, eligible employees can opt for a higher EPS contribution based on their actual pay. If we break down the numbers using an example:
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Scenario 1 (Current):
- Basic Pay: Rs 40,000
- Employee's contribution (12%): Rs 4800 to EPF
- Employer's contribution (12%): Rs 1250 to EPS, Rs 3550 to EPF
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Scenario 2 (Higher Pension Option):
- Employee can contribute 8.33% of Basic Pay towards EPS, i.e., Rs 3332
- EPFO will retrospectively deduct this amount from the PF account from the joining date or November 1, 1995, whichever is later.
To calculate the EPS pension, the formula is "Pensionable Salary X Pensionable Service / 70". If you don't opt for the higher pension, the EPS pension is based on the average of 60 months' average pensionable salary at the time of retirement.
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Example (No Higher Pension):
- Joining age: 25, Retirement age: 58
- Monthly pension: Rs 7071 [(Rs 15000×33)/70]
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Example (Opting for Higher Pension):
- Average pensionable salary (Basic+DA) for the past 60 months: Rs 40,000
- Monthly pension: Rs 18,857 [(Rs 40000×33)/70]
It's worth noting that more clarification on the calculation of higher pension is expected from EPFO, and the provided examples assume the pension calculation formula remains unchanged. Stay tuned for the EPFO circular on pension calculation to get a clearer idea of the potential higher pension amount.
