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Overview on Opting for higher pension under EPS on EPFO portal

Who is eligible to apply?

Employee must be in service and contributing to pension scheme under EPS-95 before 01.09.2014 or individuals retired after 01.09.2014 but contributed to EPS-95 before 01.09.2014.

Member of EPFO before 01.09.2014

✅

Still in employment

✅

Retired after 01.09.2014

✅


When is the last date to opt for HIGHER PENSION?

03.05.2023.


What is Pensionable salary?

Pensionable salary is used to calculate the contribution made to EPS out of the employer's contribution of EPF.

If Not opting for higher pension, it is Rs.15000 p.m irrespective of your actual Basic + DA p.m

If opting for higher pension, it is considered as the average of last 60 months actual Basic + DA p.m before retirement.


What is pensionable service?

The number of years of service for which contribution to EPS was made. 


What is the formula to calculate monthly pension?

Monthly pension amount  = Pensionable salary * (Pensionable service / 70)


How much does the employer contributes to EPF?

Employer contributes 12% of (Basic + DA) every month.


What are the components of employer contribution?

Out of 12%, 8.33% of pensionable salary goes to EPS and the balance of 12% goes to EPF


What is the capping of Basic + DA for EPS calculation?

  • Till 01.09.2014, it was Rs.6500.
  • From 01.09.2014, it is Rs.15000.

What is the importance of capping?

Irrespective of the Basic + DA earned by employee, for the purpose of calculation EPS, the Basic + DA shall be calculated as Rs.15000/Rs.6500 per month.


What does Opting for Higher pension mean?

Now the employee is given an option to opt for higher pension which means the capping on the pensionable salary will be removed and the actual Basic + DA earned will be considered.


Does this application in EPFO site needs to be approved by the employer?

Yes. The application made by employee in EPFO portal shall be sent to respective employers for their E-sign. Only after the approval by the respective employer, the application shall be considered for processing by Commissioner, EPFO.


Procedure for application


Step 1: Employees need to visit the EPFO Unified Member portal.

Step 2: Click on the ‘Application form for joint option’ option.

Step 3: If you retired before 2014, click ‘Validation of joint options who retired before 01.09.2014 and exercised joint option’. If you retired after 2014, click ‘Exercise of joint option for employees who were in service prior to 01.09.2014 and continued to be in service 01.09.2014 but could not exercise the joint option’.

Step 4: Fill in the details and submit the form.


PS: Based on the facts I have gathered and learnt, I draw the following conclusion. However, this is my personal view and the readers are requested to validate this opinion before taking a decision. This is purely made for knowledge sharing purpose.

 

If Opting for higher pension

NOT Opting

Accumulated balance

More EPS will be accumulated

More EPF will be accumulated

Pension received per month

More

Less

Accumulated PF balance

Less

More

Interest on accumulated PF balance

Less

More

Lump sum retirement benefits

Less

More

Taxation

Pension is taxable

PF withdrawn during retirement is EXEMPT

Inflation

Pension is fixed and hence, difficult to meet inflation

Investing the retirement benefits wisely can help you meet the inflation

If looking for monthly income

Fixed pension per month

Employee can invest the PF withdrawn  in monthly paying schemes

Principal accumulated

Principal balance of EPS shall NEVER be paid to the individual

Apart from earning monthly income from investing the balance withdrawn, the principal is also secured in his own hands

Systematic income

Fixed meagre income

Multiple options to increase the value of investment and receive monthly income

Withdrawing the balance

There are restrictions to withdraw balance from EPS

Lesser restrictions to withdraw EPF balance than EPS.

Contribution towards EPS with retrospective effect

For the earlier contributions made at capped salary, the difference in higher EPS to be contributed from EPF balance and there might be other changes due to interest already earned on EPF contribution.

 

No impact

In case of death

The nominee will receive 50% of the pension received by you.

The nominee will inherit all the investments made out of EPF withdrawal and still continue to receive pension @50% of your pension.



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