Explained Impact Of Supreme Court (SC) Judgement Dated 04.11.2022 On Higher Pension (With Illustration of Estimated Revised Pension and Differential Amount Payable)
The story so far: Thousands of working individuals who are eligible for pension under the Employees’ Pension Scheme-1995 (EPS-1995) of the Employees’ Provident Fund Organization (EPFO) and those who already draw pension have been litigating in various courts for several years, seeking to invoke a provision in the scheme by which pension benefit can be substantially increased. A three-judge bench of the Supreme Court ruled in the matter on November 4, 2022 where the EPFO appealed various orders favoring employees issued by the Kerala, Rajasthan, and Delhi High Courts.
Employees’ Pension Scheme (EPS-95) offers pension on retirement, disablement, pension to widow and pension for nominees.
Recently on 4th November 2022 the Honorable Supreme Court has given the decision that the employee may opt for higher pension by contributing to EPS-95 on actual/ uncapped salary rather than on capped salary.
This article explains how much EPS Pension you will get after retirement as per Supreme Court verdict and pension payable prior to Supreme Court verdict on 4.11.2022.
1. Gist of Supreme Court verdict and background
i. EPS-95 Effective From: The Employees’ Pension Scheme, 1995 (EPS-95) came into effect from 16.11.1995.
ii. Contribution on Capped Salary: Presently the contribution to EPS 95 is based on capped salary which is Rs.15,000 pm at present and the contribution on which comes to Rs.1,250 (i.e., 8.33%*15,000).
iii. Clause Deleted w.e.f. 01.09.2014 for Higher Pension: With effect from 16.03.1996, the proviso was added to paragraph 11(3) of the scheme giving an option to the employer and employee for contribution on salary exceeding the capped salary to reap a higher pension on retirement. However, vide Notification No. G.S.R. 609(E), dated August 22, 2014, w.e.f. 01.September 2014, this provision was deleted and nullified the choice of an employee to exercise the right to contribute to EPS on higher/ uncapped salary, and subsequently to earn higher pension.
iv. Previous Judgments: Earlier judgements of Kerala HC and Delhi HC in October 2018, May 2019 respectively, moved towards restoring the option of higher/ uncapped pension. A review petition was also heard by the SC and finally on November 4, 2022, a three Judge bench at the SC passed its judgment in the case of the Employees’ Provident Funds Organization (EPFO) & ANR. etc. vs. Sunil Kumar B. & ORS etc.
v. Latest Judgement of Supreme: By its verdict on 04.11.2022 the SC has given the decision to uphold the right of existing employees to opt for higher pension by contributing to EPS on higher salary.
vi. Eight weeks’ time to EPFO to implement the scheme: The SC has directed the EPFO to implement the directives within 8 weeks of time.
2. Overview of Employee Pension Scheme-95 ( EPS-95)
Employee provident fund organization (EPFO) manages the pension account of all those who are contributing to EPF including private trust. The feature of Pension Scheme is as under:
i. Scheme is called: As employees’ pension scheme 1995 (EPS-95) and comes into force on 16.11.1995.
ii. Scheme cover: EPS-95 & employee family pension scheme 1971 just before commencing of EPS-95.
iii. Pension Age 58/60: Employee can start receiving pension after attaining the age of 58 or 60 year at his option.
iv. Guaranteed pension: This scheme gives a guaranteed monthly pension after retirement.
v. EPFO manages: This is managed by EPFO of pension a/c of all those who are contributing to EPF including private trust.
vi. Capped EPS contribution :
[8.33%*5,000=Rs. 417 from 16.11.1995 to 07.10.2001]
[8.33%*6,500=Rs. 541 from 08.10.2001 to 31.08.2014]
[8.33%*15,000= Rs. 1250 from 01.09.2014 to till date]
vii. Lifelong pension: Pension is available to the member & upon his death to the members of the family.
viii. After 10 years of Service: Eligible for pension only after a minimum service of 10 years.
ix. Maximum & Minimum Pension: One can get maximum of Rs. 7,500 pm and minimum of Rs.1,000 pm.
x. Maximum service for the calculation of service: 35 years.
xi. The fraction of service: For 6 months or more is treated as one year.
xii. Taxability: Pension is taxable under the Income Tax Act, 1961 under the head Income from Salary or other sources as the case may be.
xiii. EPS contribution is from Employer Contribution: Out of the employer’s monthly contribution of PF of 12%, an amount @ 8.33% goes into EPS and rest of the amount to EPF. Suppose an employee has salary( Basic + DA ) of Rs. 1,00,000 pm and employer contribution to PF is 12% pm then Rs.1250 ( i.e. 15000*.8.33 % ) will go to EPS and rest of the amount Rs. 10750 will go to EPF as employer contribution.
xiv. This is not an NPS Scheme: This EPS scheme should not be confused with National Pension Scheme (NPS). NPS is a scheme for which separate deduction under section 80CCD of Income Tax is available. Under this scheme no income tax deduction is available for contribution to EPFO .
3. Who will get Pension from EPFO
i. To The Subscriber: The subscriber gets pension (as per the formula in the scheme) so long as he is alive.
ii. To The widow : After the death of the subscriber, the widow gets pension equal to 50% of pension payable to member on the date of his death subject to min of Rs.1,000 pm. In case of two or more widows, Pension shall be payable to eldest surviving widow. On her death, it shall be payable to next surviving widow if any. Eldest means seniority with reference to marriage date.
iii. To The Children: If the deceased member has any surviving children falling within definition, they shall also be entitled to monthly pension in addition to widower pension. The pension in this case is equal to 25% of widow/widower pension to each child subject to a maximum of 2 children at a time till 25 years of age.
4. Manner of Calculation of Contribution under EPS-95
The calculation of Pension contribution is illustrated as under:
|
Description |
Amount |
| Monthly salary (Basic + DA + Special Pay + Stagnation pay, if any) which is to be considered for the purpose of PF calculation. | 1,00,000 |
| Employer Contribution 12% of Salary (A) | 12,000 |
| EPS Contribution @ 8.33% on capped salary 15,000 [8.33% *15,000] (B) | 1,250 |
| Balance Amount will go to employees PF a/c (A-B ) [12,000-1,250] | 10,750 |
5. How to Calculate Retirement Pension Admissible Under The Scheme
What are the Criteria
i. Monthly Contribution made to Pension Fund and
ii. Number of Years of Service Rendered.
There are 2 Scenarios in which pension are to be calculated:
Scenario 1: If you joined after 15.11.1995
Scenario 2: If you joined before 15.11.1995 & retiring after that date
Scenario 1 : Formula for pension, if you joined after 15.11.1995
EPS Pension = Average Salary X Number of Years of Service
70
What is Number of Years of Service and Average salary in calculating Pension
- Eligible for pension only after the 10 years of contributing to EPS, else withdraw your EPS amount.
- Maximum service for the calculation of service period is 35 years.
- If you have completed >20 years of service then add 2 years as bonus service.
- Average Salary (salary of preceding 60 months from the date of exit) means pensionable salary
- Pensionable Salary means capped salary on which you were contributing in EPS ( Rs. 15,000/Rs. 6,500/Rs 5,000)
Illustration: Calculation of Pension for Scenario-1 (joined after 15.11.1995)
Example 1.
What pension Mr. X will get if he works for 14 years from 1 Jun 2015 with his average salary of Rs. 20,000 p.m.
EPS Pension = Average Salary X Number of Years of Service
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EPS Pension = 15000 X 14 = 3,000 pm So Mr. X’s pension from 1 Jun 2029 will be Rs. 3000.
70
Example 2:
Mr. X renders maximum employment of 33 years with capped salary of Rs 15,000
EPS Pension = 15000 X 35 =7,500 The Maximum amount of pension would be 7500 pm
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Note: Number of years of service taken above is 35 Years i.e.33 years + 2 years bonus Service as the service rendered is >20 years.
Scenario 2: Formula for pension if you joined before 15.11.1995 & retiring after 19.11.1995
Pension for Past Service Period Prior to 16.11.1995
- Table A as given below are used to calculate pension amount for the past period prior to 16.11.1995. Pension amount in this case depends on the salary amount and the number of years of service till 15/Nov/1995.
- Example : If a person had a salary of Rs. 3000 on 15.11.995, and he had worked for 16 years till 16.11.1995, then using the table A, he would get pension of 135 pm for service before 16/11/1995.
TABLE A:
| Years of Past Service | Salary Up to ₹ 2500 | Salary> 2500 |
| Up to 11 years | 80 | 85 |
| 11-15 years | 95 | 105 |
| 15-20 years | 120 | 135 |
| Above 20 years | 150 | 170 |
Enhanced Pension for Past Service Period
(Who joined before 15.11.1995 and retiring after 15.11.1995)
If any employees attains his 58 years of his age after 16.11.1995, his pension amount will be multiplied by a factor stipulated in table “B” as given below.
For Example: If the above employee , who has worked for 16 years prior to 16.11.1995 and retires on 20/11/1996 ( worked more than one year but less than 2 years after 15.11.1995 ) would get pension of Rs. 151.47 (135 x 1.122).
TABLE B: Selection of Factor for Multiplication (Counting the service period rendered after 16.11.1995)
| less than 1 year | 1.039 |
| less than 2 year | 1.122 |
| less than 3 year | 1.212 |
| less than 4 year | 1.309 |
| less than 5 year | 1.413 |
| less than 6 year | 1.526 |
| less than 7 year | 1.649 |
| less than 8 year | 1.781 |
| less than 9 year | 1.923 |
| less than 10 year | 2.077 |
| less than 11 year | 2.243 |
| less than 12 year | 2.423 |
| less than 13 year | 2.616 |
| less than 14 year | 2.826 |
| less than 15 year | 3.052 |
| less than 16 year | 3.052 |
| less than 17 year | 3.560 |
| less than 18 year | 3.845 |
| less than 19 year | 4.152 |
| less than 20 year | 4.485 |
| less than 21 year | 4.843 |
| less than 22 year | 5.231 |
| less than 23 year | 5.649 |
| less than 24 year | 6.101 |
| less than 25 year | 6.589 |
| less than 26 year | 7.686 |
| less than 27 year | 7.686 |
| less than 28 year | 8.301 |
| less than 29 year | 8.965 |
| less than 30 year | 9.682 |
| less than 31 year | 10.457 |
| less than 32 year | 11.294 |
| less than 33 year | 12.197 |
| less than 34 year | 13.173 |
6. Illustration Showing Complete Calculation Of Pension Of Employee Who Joined Service Prior To Introduction Of EPS-95 And Retired Thereafter
(Joined before 15.11.1995 and retiring after that)
| Pension For The Past Service | |
|
01/06/1985
Rs. 15,000 01.01.2018 10 years Rs. 85 From Table A 5.649 From Table B. Rs. 480 |
| Pension for Future Service | |
|
22 years
2 years Rs 11,600. Rs 3,977 Rs 4457 |
7. Table Showing Calculation of Contribution Payable By Employee Based On Capped & Uncapped Salary And Revised Pension Amt.
(Assuming Starting Salary of Employee Rs. 50,000 pm with Annual Increase of 8%)
8. Table Showing Aprox. Pension Amount Based Upon The Actual Salary/Uncapped Salary
| Total Year of Service | Service Period Including Bonas | Year of Retire-ment | Approx Average Salary Including DA Per Month | |||||
| 30000 | 50000 | 75000 | 100000 | 200000 | 300000 | |||
| 1 | 1 | 1996 | 429 | 714 | 1071 | 1429 | 2857 | 4286 |
| 2 | 2 | 1997 | 857 | 1429 | 2143 | 2857 | 5714 | 8571 |
| 3 | 3 | 1998 | 1286 | 2143 | 3214 | 4286 | 8571 | 12857 |
| 4 | 4 | 1999 | 1714 | 2857 | 4286 | 5714 | 11429 | 17143 |
| 5 | 5 | 2000 | 2143 | 3571 | 5357 | 7143 | 14286 | 21429 |
| 6 | 6 | 2001 | 2571 | 4286 | 6429 | 8571 | 17143 | 25714 |
| 7 | 7 | 2002 | 3000 | 5000 | 7500 | 10000 | 20000 | 30000 |
| 8 | 8 | 2003 | 3429 | 5714 | 8571 | 11429 | 22857 | 34286 |
| 9 | 9 | 2004 | 3857 | 6429 | 9643 | 12857 | 25714 | 38571 |
| 10 | 10 | 2005 | 4286 | 7143 | 10714 | 14286 | 28571 | 42857 |
| 11 | 11 | 2006 | 4714 | 7857 | 11786 | 15714 | 31429 | 47143 |
| 12 | 12 | 2007 | 5143 | 8571 | 12857 | 17143 | 34286 | 51429 |
| 13 | 13 | 2008 | 5571 | 9286 | 13929 | 18571 | 37143 | 55714 |
| 14 | 14 | 2009 | 6000 | 10000 | 15000 | 20000 | 40000 | 60000 |
| 15 | 15 | 2010 | 6429 | 10714 | 16071 | 21429 | 42857 | 64286 |
| 16 | 16 | 2011 | 6857 | 11429 | 17143 | 22857 | 45714 | 68571 |
| 17 | 17 | 2012 | 7286 | 12143 | 18214 | 24286 | 48571 | 72857 |
| 18 | 18 | 2013 | 7714 | 12857 | 19286 | 25714 | 51429 | 77143 |
| 19 | 19 | 2014 | 8143 | 13571 | 20357 | 27143 | 54286 | 81429 |
| 20 | 20 | 2015 | 8571 | 14286 | 21429 | 28571 | 57143 | 85714 |
| 21 | 23 | 2016 | 9857 | 16429 | 24643 | 32857 | 65714 | 98571 |
| 22 | 24 | 2017 | 10286 | 17143 | 25714 | 34286 | 68571 | 102857 |
| 23 | 25 | 2018 | 10714 | 17857 | 26786 | 35714 | 71429 | 107143 |
| 24 | 25 | 2019 | 11143 | 18571 | 27857 | 37143 | 74286 | 111429 |
| 25 | 27 | 2020 | 11571 | 19286 | 28929 | 38571 | 77143 | 115714 |
| 26 | 26 | 2021 | 12000 | 20000 | 30000 | 40000 | 80000 | 120000 |
| 27 | 29 | 2022 | 12429 | 20714 | 31071 | 41429 | 82857 | 124286 |
Conclusion
By looking to the above figure of ROI, it looks fair enough that we should go for higher pension. But it depends upon many other factors such as:
1. Viability of the scheme from the EPFO perspective for giving the higher pension.
2. In case of EPS-95, there is no provision of return of capital (ROC). After the death of subscriber the family gets pension but not ROC.
3. Other Options of Investment of the differential amount payable to EPFO for getting higher pension should be explored.
4. Calculation is based on the assumed figure. True figure will depend on the actual salary data and other details of the employee.
5. At this stage, we would probably need more clarity, which is possible post the legislative changes in the EPFO rules.
6. Exempted employers would have to transfer the necessary amounts to the EPFO.
7. Employers also need to understand the implications of SC judgement in order to effectively communicate this to their employees and to facilitate the implementation of the same.
8. Option of higher pension will depend on the individual to individual based upon the family size.
9. Availability of old/complete record with Employer is also an issue
10. Implementation of the SC judgement will depend on the EPFO response.
******
Author is working in a Maharatna PSU and can be reached at [email protected]
Disclaimer: The views expressed in this article is solely of the author and in no way it can be considered as the views of management or organization.
Author Bio
What is the real meaning of actual salary as per supreme court order dtd 4.11.2022?
1. Is it Basic salary plus DA?
or
2. Gross salaries for a month?
please clarify?
my widow sister is pensionar of epfo . she received pension wef oct 19. Can she get the judgement of SUPREEM COURT.
Respected Sir,
My Father is working in an EPS governed organisation since 1989 & has been a member of EPS’95. He’s contributing 8.33% of his PF amount within the ceiling wages(5000, 6500, 15000) since then. On May-2023 he’s turning 58, and now he wants higher pension on his actual wages and he’s ready to contribute the difference amount. But from when he should contribute the difference amount?? From 1995 or 2014?? Kindly clarify this sir.
With Regards.
I started my first job on 1st June 1998 at a Government Undertaking (PSU) and left the job in August 2012. Thereafter I joined a multinational ( Private ) Company and still working with the sam Job. The PF has been deducted during the entire service tenure till date. How am I eligible for the arrears under EPS 95 and how should I proceed to ensure that the pension is applicable for me and how should I proceed with the same. What is the role of my previous employer and present employer with regards to EPS95 ? Kindly reply to my query.
Sir, I am a Maharashtra PSU Employee. I intend to opt for higher pension. One thing I want to know, is option of commutation of pension is available to State Government PSUs?
The maximum amount of pension one can get under EPFO is around 3000/- (Max). Their working is like that.
Hope with the new scheme people get more.
I had been working in an EPF governed organisation since 1989 and had been contributing on ceiling wage.
I became a member of Employees’ Pension Scheme, 1995 in November, 1995, as it came into existence. Contribution on EPS(Pension) Fund was made by the employer @8.33% on ceiling wage.
I have been drawing higher wage (greater than Rs.5,000, Rs.6,500 and later Rs.15,000).
I retired from service in November, 2019 and exited EPS’95 in Novermber, 2017 upon attaining the age of 58 years.
I wish to give an Option for higher EPS’95 Contribution (arrears of EPS’95 Contribution) and pay the differential amount, in the wake of hon’ble Supreme Court judgement dt. 04.11.2022.
My question is whether the arrears of EPS’95 Contribution are payable wef 16.11.1995 or 01.09.2014 ? I wish to pay arrears since 16.11.1995 and be eligible for higher pension as per EPS’95 Rules. Kindly reply with reference to the Supreme Court judgement dt. 04.11.2022, esp. para 44. This is urgently needed please.
(Naresh Kapoor : Ph: 9810724310, Email : [email protected])
Dear Sir/Madam,
I retired from a private company on 04/04/2020 after attaining 60 years. I joined the company on 01/09/1984. I have received all superannuation dues after retirement. I have been getting the monthly EPS pension of Rs 3000/- since Jan 2018.
Now, if I opt for higher pension, I understand –
1. I will have to pay in the EPS account an additional amount @ 8.33% of my actual basic+DA salary minus the amount already deposited in the EPS account plus applicable interest for all the years since Nov 1995 till December 2017 when I attained 58 years of age.
2. Once the higher pension is approved for me by EPFO, I am supposed to get the arrear of the differential pension amount with applicable interest since Jan 2018 till I start getting the monthly higher pension.
I request your views on the above two points.
Regards,
P P Chandra
Good service Keep going
Dear Sir/Madam, I retired from a private company on 30/07/2017 after attaining 58years. I joined the company on 14/07/1980. I have received all superannuation dues after retirement. I have been getting the monthly EPS pension of Rs 1901/- since August 2017. Now, if I opt for higher pension, I need your advice 1) How much additional amount should I pay to the EPS account .My actual basic+DA salary ( Rs 15,500 ) is at the time of retirement plus applicable interest . 2. Once the higher pension is approved for me by EPFO, I am supposed to get the arrears of the differential pension amount with applicable interest since Aug 2017 till I start getting the monthly enhanced pension.3) What are the Documents I have to submit to get Enhanced Pension and Last Due date to remit the Balance amount to EPFO . I request your views on the above three points.
Thank you for your valuable TAX GURU services.
Regards,
V.UDHAYAKUMAR ., B.E,M.I.E,
The Pensioner server for 26 years in a Pvt IT Co retired in May 2018 with a last basic salary of Rs.25,512/-, Monthly PF deduction was Rs 2,941/-( employee side), getting monthly pension Rs 2,550/-.
When applied for Higher Pension in EPFO site, the result is as :
Applicable only if date of exit is prior to 01.09.2014 against PPO No___. Please advise.
deviprasad,
Noida
9811794001
my joining date was 12th September 1980 and retired on 30th June 2012 (DOB 20.06.1954)on the gross last drawnCTC 12.48lacks pa. this time EPF pension getting of rupees 2207 pm. under caped limit of 6500 ie 541 pm being deposited by employer. moreover for option to be given for pension on higher wages beyond capped limit niether circular of EPFO circulated by employer nor sought option individually.. in this regard will you help us to guide what we have to do for further course of legal action
Thanks 9540134333
I got the retirement at the edge 50 yrs on 30 th June 2021 with the basic Salary 22300/Rs.and after that followup for pension workings I have the pension from the age 58 year on ward for that they have given the backlong as lumg sum amount of Rs 20k+ further I am getting the pension of Rs 1705 per month now as per the supreme court decision dt 04.11.2022. what should I do ? please advise me.
retired on 30.04. 2018 from fci
What about refunding of employer’s contribution.
I’m retired from Mumbai port trust on VRS scheme the year 2014 , 1st May. If I am eligible to get the Higher pension as according to the Supreme Court judgement of 2022?
Dear Mr. Deepak,
With reference to SC judgement dated nov4,20222, wherein sc has offered one time relief to contribute more towards pension provided they meet certain conditions.
In this regards kindly note that undersigned is EPS member since nov’1995 and continued to contribute to EPS on caped salary limit till 2021,dec at the age of 58.
Undersigned is still contributing under EPFO @ 12% of employer as well employee contribution and ready to transfer the required amount of fund to eps from epfo to get pension of max basic salary which is 38500/- at present.
Presently I am not availing PENSION as I have opted for deferment of pension by two years till 2023,dec.
Our employer is waiting for detailed operational guidelines to be issued by EPFO in order to submit joint declaration to EPFO office AURANGABAD( MAH).
Kindly further note that undersigned is still working in organization and is member of EPFO and have plan to still work till 2027 and continue to be member of EPFO if law permits( by any govt regulation for extension of retirement age..
Kindly review my case and give clarification on following.
1) Am I eligible to get higher pension on my actual salary at the time of retirement at the age of 58!, as SC has given relief to such pensioners under article 142 of constitution.
2) If I continue to work for another five years i.e till 2027 ,can I get pension after five years at actual salary at the age of 2027
3) If yes how much pension can I get in both the above cases.
4) Is there any confirmation that govt is extending retirement age
5) When EPFO is going to release operational guidelines
Regards,
R. K. Gupta
Plant Head
Keshardeep Pressings
9922993451
I HAVE RETIRED AND GETING EPFO95 PENSION AS PER OLD CALCULATION SINCE AUGUST 2017. NOW IF PAY MY BALNCE CONTRIBUTION ON UNCAPPED SALARY AS PER APEX COURT JUDGEMENT, WILL I BE ELIGIBLE FOR ARREAR PENSION BASED ON NEW CALCULATION STRTING FROM AUGUST 2017?
EXCELLENT.
ARREARS OF SALARIES PAYABLE, WITH OR WITHOUT INTEREST NOT COSIDERED TO CHECK NET BENEFIT WHICH SHALL BE ALMOST AT PAR NOW IF RETIRED IN 2015
EPFO IS NOT TAKING OF AVERAGE OF 5 YEARS BUT SINCE 1995