The Employees’ Provident Fund Organisation (EPFO) has changed the way pensions are calculated for certain members under the Employees’ Pension Scheme (EPS).
For some retirees, this update could mean a much higher monthly pension.
The key difference? Their pension may now be calculated on their actual salary instead of a fixed wage limit.
Here’s what that means in simple terms.
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How the EPFO Pension Worked Earlier
Under the EPF system, both the employee and employer contribute 12 percent of the basic salary to the provident fund.
From the employer’s 12 percent share, 8.33 percent goes into the pension scheme (EPS), and the remaining amount goes into the EPF account.
However, since 2014, there has been a wage ceiling of Rs 15,000 per month for pension calculation.
This means even if someone earned more than Rs 15,000, only Rs 15,000 was considered for calculating pension benefits.
As a result, higher-paid employees saw their pension amount limited.
What Has Changed Now
EPFO has revived an earlier provision that benefits certain eligible members.
Now, some employees can get their pension calculated on their full actual salary, not just the Rs 15,000 cap.
But this applies only to a specific group:
Employees who were EPF members before the 2014 wage cap change
Those who had opted to contribute to EPS based on their actual full salary
For them, the pension payout can be significantly higher compared to what they would receive under the capped system.
Why This Matters for Retirement
Pension under EPS is calculated using this formula:
Pension = (Average of last 60 months’ salary × Years of service) ÷ 70
Earlier, the “average salary” part was limited to Rs 15,000 due to the wage cap.
Now, eligible members can use their real salary for this calculation.
That means if someone earned well above Rs 15,000, their final pension amount could increase substantially.
For long-serving employees, this can make a noticeable difference in retirement income.
Who Will Actually Benefit?
This update does not apply to everyone.
It mainly benefits:
Workers who joined EPF before 2014
Employees who had already opted to contribute based on their actual salary before the cap was enforced
If you joined EPF after 2014 or did not opt for higher contributions earlier, you may not qualify for the revised pension calculation.
The Bottom Line
This change is a major relief for a select group of EPFO members.
For those eligible, pensions will now reflect their true earnings instead of an outdated salary cap.
That could mean a bigger and more secure monthly income after retirement.
If you are unsure about your eligibility, it’s a good idea to check your EPFO records or speak with your HR department.