Private Sector Employee Pension Set to Increase after SC Verdict

Pension receivable under EPS is set to increase significantly for private employees after the Supreme Court verdict dismissed a special leave petition filed by the EPFO (Employees Provident Fund Organisation). The special leave petition from EPFO was made against a Kerala high court judgement that instructed that pension pay out under EPS (Employees’ Pension Scheme) be made on the basis of their full salary instead of the current cap of Rs. 15,000 per month.

How is EPF Contribution Changing?

Under existing rules, the contribution of EPF by salaried individuals is divided into two parts – PF (provident fund) and EPS (Employees’ Pension Scheme). Prior to intervention by the courts, the EPS contribution was calculated on a limit of Rs. 15,000 per month i.e. 8.33% on Rs. 15,000 equal to Rs. 1250 per month. Now that the cap of Rs. 15,000 has been removed, those with higher salary can potentially contribute more towards EPS and receive a higher pension pay out at retirement.

While this increase in EPS contribution will potentially decrease the PF contribution made by the employee, the overall impact is expected to be minimal after taking into account the higher post retirement pension pay out.