EPFO Higher Pension News: Why Are Pensions Under EPS Low For Most Employees? Govt Clarifies

EPFO Higher Pension Updates: In the month of February, the Employees’ Provident Fund Organisation (EPFO) introduced a new procedure that allows its subscribers along with their employers to jointly apply for a higher pension under the Employees' Pension Scheme (EPS) on the EPFO member portal. The last date to opt for a higher pension, which was earlier announced as March 3, 2023, has now been extended to May 3, 2023.

Although the EPS was created under the EPFO to provide pensions to salaried individuals after retirement, the pension amount has been a cause for concern as it is considerably low than what was expected. Recently the government explained the reason for low pensions while talking about the number of people who have applied for the EPFO higher pension option on the UAN portal.

The Union Minister of State for Labour and Employment, Rameshwar Teli, addressed people’s queries on lower pensions under the EPS at a recent Lok Sabha session on Thursday, March 16, 2023. The Minister cited that one of the biggest and most crucial reasons for lower pensions under the EPS is frequent withdrawals. Many salaried employees withdraw money from their EPF accounts before retirement for various reasons, including medical emergencies, and financial obligations, among others.

These frequent withdrawals reduce the pension fund's corpus and the pension amount that employees receive after retirement. Talking about the withdrawal from the scheme in the past financial year Teli said, “During 2021-2022, around 37.74 lakh withdrawal benefit claims amounting to Rs. 7988.89 Crore were settled.”

As stated by Rameshwar Teli, another reason for low pensions among salaried employees is the low monthly pension contributions. Low monthly pension contributions for a significant number of members with low monthly salaries results in a lower pensionable salary and consequently a lower calculated pension.

Minister Rameshwar Teli clarified that the government can’t increase the scheme benefits of EPS as “the Pension Fund was/is in actuarial deficit.” He also talked about how the Government, “for the first time, in the year 2014, provided a minimum pension of Rs. 1,000/- per month to the pensioners under the EPS, 1995 by providing budgetary support, which was in addition to the budgetary support of 1.16% of wages provided annually towards EPS to Employees’ Provident Fund Organisation (EPFO).”

The first reason for lower pensions i.e. ‘frequent withdrawals’ is beyond the government’s control and is actually at the employees' discretion, and sometimes even beyond the employees’ control, for example, when it's a medical emergency. However, one thing which can be regularised is the monthly contribution towards the pension fund under the EPS.

Hence, following a Supreme Court judgment on the matter, the EPFO higher pension option was made available to the employees. That’s when the EPFO announced a new procedure where employees with higher salaries can also opt for higher pension benefits.

According to the statement given by Minister Rameshwar Teli at the Lok Sabha, as of March 9, 2023, as many as 1,20,279 employees had already applied for the higher pension option online via the EPFO portal. Now, with the date extension till May 3, 2023, the number only seems to be going upwards.

However, to go beyond the pensionable salary capped at ₹15,000 per month, employees and employers must jointly apply for a higher pension. Under this option, the employers can deduct a sum equal to 8.33% of the ‘actual basic salary' towards pension under the EPS.

As per the new guidelines, this joint option is only available to those employees who had actual salary contributions exceeding the existing wage ceiling, did not previously exercise the joint option under para 11(3) of the pre-amendment Employees’ Pension Scheme (EPS) of 1995 (which has since been removed), and were members of EPS 1995 before September 1, 2014, and have remained members on or after that date.

You can now apply for a higher pension under EPS via the EPFO portal in a few easy steps. Here’s how you can jointly apply for a higher pension with your employer:

1. Click on the link and go to the UAN portal or EPFO portal.

2. Log in with your Universal Account Number (UAN) and password.

3. Click on “Pension on Higher Salary: Exercise of Joint Option under para 11(3) and para 11(4) of EPS-1995 on or before 3rd May 2023” from the Important Links section.”

4. Select "Application form for joint options - Joint options under erstwhile para 11 (3) and para 11 (4) of EPS 1995 for employees who were in service prior to 1st September 2014 and continued to the in service on or after 01.09.2014 but could not exercise joint option under erstwhile provision to para 11 (3) of EPS 1995 to be exercised on or before 3rd May 2023."

5. Enter details such as UAN, Name, Date of birth, Aadhaar number, Aadhaar linked mobile number and captcha.

6. Click on “Get OTP”.

7. Now enter the OTP sent on your registered mobile number and complete your application.

That’s it, your application is submitted successfully. Kindly note that currently, this scheme is not available for those employees, whose employers are not contributing to the EPS on actual salary.