Are You Paying Enough for Your Retirement? EPFO's New Circular Holds the Answers on How to Get higher pension

Want to know the secret to boosting your retirement income and securing your financial future? Learn how to increase your pension income with EPFO's latest circular. Read now

Apply for a higher pension

Retirement planning can be a complex and overwhelming process, but a recent circular issued by the Employee Provident Fund Organization (EPFO) aims to clarify how subscribers can get an increased pension through enhanced benefits. The circular, issued on April 23 2023, outlines the process for eligible subscribers to apply jointly with their employer using the prescribed application form and required documents, such as a joint declaration. The field office will examine the applications and joint options, and once the requirements are complete, the employer's wage details will be verified with the data available. In this article, we'll take a closer look at the EPFO's circular and explain how you can increase your Employee Pension Scheme (EPS) pension for a more secure retirement.

What issues does the new EPFO circular address?

The circular, released on April 23, 2023, clarifies three key issues related to the application process. Firstly, it explains what will happen once eligible subscribers and their employers submit the joint application form. Secondly, it outlines the procedure for correcting errors in the application form. Lastly, it guides what to do if an employer has not approved the joint application. By addressing these issues, the EPFO aims to simplify and streamline obtaining higher pensions, ensuring its subscribers a more secure financial future.

Clarifications in the new EPFO circular

The recently issued circular by the EPFO states that subscribers who have contributed on actual wages higher than Rs 5,000 or Rs 6,500 per month or have opted for a higher pension will be eligible for enhanced benefits. This includes pensioners whose earlier requests for a higher pension were declined by the EPFO authorities before the 2014 amendment to EPS-95. To avail of these benefits, eligible subscribers must submit a joint form with their employer and all necessary documents, such as a joint declaration.

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What occurs after submitting the joint application form for a higher pension?

To avail of the enhanced benefit, eligible subscribers must submit a joint application with their employer using the prescribed form provided by the commissioner. Along with the application, they must submit all other required documents, such as a joint declaration. In cases where the details of the field office and the employer match, the payables will be determined, and a directive will be issued by APFC/ RPFC-II/ RPFC-I for the deposit or transfer of the payables.

What happens if there's an error in the joint application form?

According to the circular, if the information provided in the application or common option form needs to be completed, corrected, or requires correction, then APFC/ RPFC-II will ask for the correct information from the employer within a month while informing the employee/pensioner. If the correct information is received, the case will be processed further. However, if the correct information is received after a month, the decision will be made based on merit by the APFC/ RPFC-II/ RPFC-1.

What if the employer declines the application for a higher pension?

The circular stated that if the employer does not approve the submitted application form or joint option before rejecting it, they will have a chance to provide additional evidence or correct any mistakes or errors, including those made by employees or pensioners. This opportunity will be given for one month, and employees and pensioners will be informed of it.

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Mechanism for Grievance Redressal

After submitting the request form and making necessary payments (if any), the applicant can register any complaints on EPFIGMS. These grievances should be registered under the specified "higher pension" category in the Supreme Court Judgment dated 04.11.2022. A Nominated Officer will address and dispose of all such grievances. The Officer-In-Charge of the Regional Office and Zonal Office will monitor these complaints.

(Note: The deadline for submitting the joint application form online to receive an increased pension from EPS has been extended by the EPFO from March 3, 2023, to May 3, 2023.)

Given below are certain criteria that enable an employee to receive a higher pension from EPS:

  • If an employee retired before September 1, 2014, and had contributed a higher amount to EPS
  • If they were a member of EPF as of September 1, 2014, but did not apply for the opportunity to receive a higher pension

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How Can Pension Under EPS (Employees Pension Scheme) Be Calculated?

As an EPFO member, you are entitled to a pension after retirement (conditions apply). You and your employer contribute 12% of your basic salary and dearness allowance to the EPF. Of the employer's 12% contribution, 8.33% goes to the Employees' Pension Scheme (EPS) and 3.67% to the EPF. However, the contribution towards EPS is limited to a wage of Rs 6,500 or Rs 15,000 per month, depending on when you joined the scheme. Furthermore, the 8.33% EPS contribution is capped at Rs 15,000, even if your salary is higher. If you were an EPF member before September 1, 2014, you would soon have the option to contribute 8.33% of your actual basic salary and dearness allowance towards EPS following a Supreme Court justice. Your contribution towards the EPF account is currently capped at 12% of your basic pay and dearness allowance. The employer contributes an equal amount, of which 8.33% goes toward EPS and 3.67% toward your EPF account. The formula for calculating the pension amount is given below:

Monthly pension amount = (Pensionable Salary x Pensionable Service)/70

  • Pensionable salary: The pensionable salary is now defined as the average of the last 60 months of your salary. This change was made through a notification on August 22, 2014. Before this notification, the pensionable salary was defined as the average of the last 12 months of your salary. It was then updated based on the average of the last 60 months of your salary.
     
  • Pensionable service: The number of years you contributed to the EPS account is known as pensionable service. According to the law, pensionable service must be rounded off to the nearest year. This means that if your service period is six months or more, it will be considered one year, but if it is less than six months, it will not be counted. If you retire at 58 years and have completed 20 or more years of pensionable service, your service period will be extended by two years as a weightage, but it should be at most 35 years of pensionable service.

How much pension can you get?

Let's assume an employee joins EPS at the age of 30 years and retires at the age of 58. Let's assume his pensionable salary at the time of retirement was Rs. 30000. Now let's see what his monthly pension would be in different situations.

  • Not opting for increased pension:

A monthly pension could be Rs 6,428, calculated as (Rs 15000 x 30)/70.

  • Opting for increased pension:

A monthly pension could be Rs 12,857, calculated as (Rs 30000×30)/70.

Note: Figures are indicative. The figures would change with change in pensionable salary and pensionable service.

The Employee Provident Fund Organization (EPFO) has released a circular explaining how subscribers can apply for a higher pension. Subscribers who have contributed on actual wages higher than Rs 5,000 or Rs 6,500 per month, or have opted for a higher pension, are eligible for enhanced benefits. The circular outlines the joint application process and clarifies the procedure for correcting errors in the application form. The deadline for submitting the joint application form has been extended to May 3, 2023. Additionally, the mechanism for grievance redressal is explained, and applicants can register any complaints on EPFIGMS.

Disclaimer: This article is for general information and should not be construed as insurance, investment, tax, or legal advice.

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