How To Get a Higher Pension from EPFO
Krishnan PR 08 April 2023
On 4 November 2022, the Supreme Court (SC) had held that those willing to opt for a higher pension should be allowed to do so. Hence, those who have retired have to first contribute to the corpus with the difference between the capped amount and the actual amount at 8.33% with interest over the years and basis which a new calculation will be done by the employees' provident fund organisation (EPFO). The SC gave a four-month window from 4 November 2022 to 3 March 2023 for all people to apply and asked EPFO to provide the necessary link and work out the operational part of it.
  
I am sharing my understanding of these new provisions for higher pensions.
 
Firstly, one does not know whether everyone will benefit or not. Because, first, you have to deposit a certain lump sum being the difference cited above. Then you will get back part of the deposit – the difference between the actual pension received till date and the revised working. So, some part of the capital deposited will be returned. Whether you can recover the balance depends on the number of years it will take. But generally, it is believed that for those who have crossed 75 years, it may not be profitable and, therefore, they should not opt for it unless they are sure to live for another 15-20 years. After you deposit the arrears with interest, It also depends on what you get back and by when the full amount paid by you is recovered. 
 
As I understand from the EPFO office, they will first give the working and the amount I need to deposit, what I will get back, and how much my revised pension will be before implementation. But this is only said orally, one has to wait and watch. Everyone should make their own working and be satisfied that they will be able to recover whatever they deposited before their lifetime.
 
Let me try and explain, with background.
 
Pensioners from the private sector receive, on retirement, a paltry amount of anything below Rs2,800pm (per month) as pension under EPFO, if you have worked for, say, 40 years. This is given out of the contributions that one makes to the pension fund every month from their salary over the years. Normally, one contributes 12% to the provident fund (PF). The company matches with 12%. As per EPFO rules, out of the company's contribution of 12%, the pension is 8.33% of capped and ceiling salary amount. And this figure is deducted from the company contribution of PF. From this, 8.33% amount the corpus is built and from there, one gets a pension every month—which generally is not more than Rs2,800, depending on the number of years of service.
  
So why is the pension low? Let us understand the reason. The reason was that the government had capped or put a ceiling on the salary on which the pension contribution was calculated. Thus, providing for a meagre corpus to government and, in turn, receiving a meagre pension amount. 
 
A few people did not want to accept this low pension amount post-retirement. Low pension is due to the low corpus, which is due to lower contribution. So, they wanted to contribute to their actual basic wages (and not the capped / ceiling amount), which was much higher and sometimes even 10 times higher than the capped amount (to provide for a reasonably higher pension on retirement).
 
When EPFO and the government disallowed this, they went to court and finally, the Supreme Court gave an order in their favour and they started getting higher pensions. Based on this, others also took it to court. On 4 November 2022, the Supreme Court came out with an order allowing all pensioners in the unorganised sector to contribute on actual basic and, thus, get a higher pension, including those who retired earlier, by providing certain checks. The court gave four months till 3 March 2023 for people to apply. Initially, EPFO only considered those in service after 1 September 2014 and came out with a link vide circular dated 20 February 2023. That link was for only those after 1 September 2014 and was also not functioning properly and people were not clear what to upload. Besides, EPFO itself was then not ready for various reasons. But, on 1 March 2023, EPFO came out with links for all and has extended the time till 3 May 2023. This is the last date for applying for a higher pension. It has also advised what is required to be attached.
 
Before we get into the details of filing online and attachments, one needs to know the background and why such documents are called for to better understand. It is important to know the dates too.
 
Prior to 16 November 1995, the pension scheme was called family pension scheme (FPS). Those working at that time had contributed to this FPS scheme till 15 November 1995. On 16 November 1995, a new scheme called the employees' pension scheme (EPS) came into effect. Hence, whenever pension is calculated by the EPFO office, it is calculated in two parts – one till the period 15 November 1995 and the next after 16 November 1995. And then both are added and that is how you get the current pension.
 
From 16 November 1995, the pension scheme is called the employee pension fund scheme (EPF).
 
Ceiling/ Capping
 
Firstly, during the FPS time itself, i.e., from October 1994 itself, the EPFO and the government put a ceiling or capping on the basic salary (on which pension is deducted). It said for pension purposes, the salary shall be taken as Rs5,000 only. This was enhanced from 1 June 2001. This limit was raised to Rs6,500. And again, from 1 September 2014, this limit was further increased to Rs15,000.
 
Secondly, they introduced something called ‘excluded’ employees. When this ceiling or cap was introduced In October 1994 under the old FPS scheme, it was declared that those drawing above Rs5,000 were ‘excluded’ employees. That means, no pension contribution was to be received from those drawing above the capped limit. But a year later in November 1995, under the new EPS scheme under 26(6) of the EPF Act, it was clarified that if anyone wanted to continue to contribute for pension (i.e., remove the exclusion), they had to then give a joint declaration with the employer which needed to be approved by the assistant commissioner. However, nobody followed this guideline, including the EPFO office. It further stated, the pension amount had to be deducted from the employer's PF contribution and that this pension would be 8.33% of the capped amount.
 
For example, If the cap was Rs5,000 and a person was drawing Rs6,000, the provident fund would still be 12% of Rs6,000 i.e., Rs720 to be contributed by both employer and employee.
 
The pension will be capped at 8.33% of Rs5,000 (cap) i.e., Rs416.50. This Rs416.50 will be taken out of the employer's PF contribution of Rs720. By this example, individual PF contribution will be Rs720, company PF contribution will be Rs303.50 (Rs720-Rs416.5), and pension contribution will be Rs416.50.
 
Companies continued to deduct or contribute PF at 12% from both, and restricting pension to 8.33% of Rs5,000 (even if salaries are more than Rs5,000). And this 8.33% is taken out of 12% of the company's PF. Thus, the company's PF contribution became 3.67%. This was without giving the joint declaration then and the EPFO also accepted this contribution.
 
On 1 June 2001, when the ceiling was increased to Rs6,500, people continued in a similar fashion. The EPFO also accepted the pension contribution and it went on.
 
On 22 August 2014, EPFO came out with a para (Para 3 of GSR 609(E) stating that those drawing above Rs15,000 should also obtain fresh approval. On 1 September 2014, they increased the ceiling to Rs15,000, again asking people to give joint declarations. This declaration is basically an agreement by both employer and employee to contribute towards the pension fund. Again, no one gave it.
 
Post the current SC verdict, the EPFO, therefore, had taken a stand that only those who applied against their notification of 2014 are eligible. Since hardly anyone applied, it was apparent that no one would get it. Subsequent development, finally, resulted in EPFO accepting that all could apply and after that gave the link for uploading.
 
Now, companies have to give an undertaking to deduct the PF on the actual salary, besides for those working to adjust their PF amount for arrears. For those who have retired, it was stated that these pensioners will give or deposit these differences, to increase the corpus. Since there is a commitment from the company's side too in the joint declaration, many companies are resorting to taking an undertaking that they will not be responsible for any payment of even administrative charges or others. Only after signing this undertaking are they giving the joint declaration. 
 
This joint declaration needs to be uploaded on the site. On the site, there are provisions for joint declaration for the erstwhile capped amounts of Rs5,000, and joint declaration for Rs6,500 – both have to be uploaded on the second page of this link provided by EPFO. Hence, whichever period you belong to, you need to upload the declaration.
 
Secondly, how does the EPFO know what your actual basic salary was? If the PF was with the EPFO office, they could get it. In my case, it was with a trust for 21 years and then it moved to the EPFO in the last years of my retirement. Hence, while the EPFO has the passbook with my basic salary in the previous years, one needs to obtain the passbook from the trust of the earlier companies. 
 
As I was told by the EPFO office, this passbook should contain the month-wise actual salary, the PF contribution by the member, the PF contribution by the company, and the pension amount. These are the figures reflected in the EPFO passbook, on the basis of which they will work the new pension. Hence, first I needed to get a passbook from the trust and then with this passbook and the joint declaration for the periods, I  uploaded it at relevant places.
 
Finally, there is a list of documents or information to be kept ready for faster uploading. Ensure all PDF (portable document format) file size are below 250kb. Information includes UAN,  PF account number, email ID registered with PF, mobile number, bank account number, IFSC code of the bank, Aadhaar, PPO number, date, office, all attachments, and an undertaking to deposit the contribution in case of no PF balance.
 
1. Go to the EPFO site and click on the link for higher pension. Another page will open where you have to enter the UAN no, name, bank details, etc. After accepting the terms, you go to the next page.
 
2. On this page, you have to enter the starting date of joining the pension—if it is under the old pension, i.e., FPS, then put that date and the last date, which is 15 November 1995. The next two dates are for EPS, which is 16 November 1995 and the date you retired or current if still working.
 
3. Below that you have to enclose the joint declaration for Rs5,000 and Rs6,500 separately under each category along with the passbook.
 
4. And then the final page comes and you submit it.
 
5. After some months, if your application is accepted, they will revert, stating how much additional amount you have to pay plus interest. 
 
Just to work out the figure yourself or the additional amount payable—Put your original basic salary minus capped salary = salary difference. On this work out 8.33%, say xxx amount. This is the pension you have to give back. On this amount, work out the interest for the number of days or months until payment is made; you get the net amount payable for one month. For that, you can make a table for the entire period to arrive at some idea of what you will need to make the payment. While the EPFO office will give the amount, with the method mentioned at this point you can work out the figure that needs to be paid. This is only to provide you with a broad idea of the amount. 
 
6. Similarly, you can work out the approximate pension that you will get back. Say, you are currently getting Rs2,000 per month. Suppose you get an enhanced pension of say, Rs20,000 as given by the EPFO office. Hence, you will be entitled to get back Rs18,000 for the period from the first day of pension starting till date (if the EPFO office decides to give it from the date of your getting pension—they may, they may not). And this entire amount should come in one lot from the EPFO immediately. Therefore, this is the partial refund of your deposit. Now for the balance sum deposited, in this example, divided by Rs18,000 will be the number of months you will take to get back the amount deposited with the EPFO. (NOTE: This is my thought. The EPFO can say they will give it only from the next month and they may not consider it. All options are open.) 
 
7. Finally, it is the EPFO office that will work out and they will give you the working. You have to check its correctness and see if you are getting the correct pension.
 
(Krishnan PR is a practising lawyer who has worked with several corporates, especially from the FMCG sector.)
 
NOTE:
The author can be contacted at his email ID: [email protected].
However, your engagement with Mr Krishnan will be strictly on a professional basis and may involve payment of his professional fees. Moneylife will have NOTHING to do with such a client-expert/advisor relationship, and you would agree to keep us out of such arrangement/s and/or consequences arising from it.
Comments
o.v.krishna25
1 year ago
If there is any possibility to extend the date for HIGHER PENSION SCHEME
Reyansh
1 year ago
I retired in 2018. If pension is paid retrospectively, do you suppose it will also be paid with interest?
Also thank you for writing the best article I have seen on the issue
kash.0818
1 year ago
The Private sector jobs are volatile and if opted for higher contribution of EPFO .IF every thing goes well is ok and contributing lakhs of rupees to the EPS fund but near the retirement age and the last five years if at all job is lossed or can not continue in the same profession or if at all joined a job in the last 5 years for a meagre or less basic salary....entire Contribution becomes losses and higher pension dreams will be ruined at a future date .Since we can not expect the same company or same CTC in the future...Is this not a defect in calculating pension which only considers basic pension in last 5 years but not on total corpus amount that you have contributed...Please enlighten on this...Thanks
prkrishnan57
Replied to kash.0818 comment 1 year ago
Yes true, if they are calculating basis last 5 years average.
bsvenkat
1 year ago
having worked in multiple companies are we expected to submit the 26(6) with signature from employers of that period or can we submit the 26(6) from the current employer?
prkrishnan57
Replied to bsvenkat comment 1 year ago
Still unclear. But on safer side it is best to submit from all.

The basic idea is EPFO office must know your actual basic for the past years. How will they know. Only thru these documents.

Will the current employer have this document, the answer is no.
Will the EPFO have these details - if the account was not with trust but with EPFO then they may have (not sure). If it was under Trust, they may not have. Hence they need it.
sundarbtw
1 year ago
So far EPFO is paying pension based on capped salary on prorata basis. i.e cap applied on various periods. 1995-2001-Rs. 5000, 2001-2014-Rs. 6500 and 2014-Rs. 15000 eventhough it needs to be one year average salary as mentioned in various news items and supreme court proceedings. In 2014, circular they have changed it to 5 years average and so judgement also. I am surprised with this clear violation of EPFO by so far. Also surprised why no one gone to courts. Any, thoughts by learned author please.
prkrishnan57
Replied to sundarbtw comment 1 year ago
True they are taking 60 months average and if it is reduced to 1 years average, the pension amount will go up, marginally though depending on the salary difference in these 5 years. I am not aware of any article/circular mentioning 12 months average is to be taken.
sundarbtw
Replied to prkrishnan57 comment 1 year ago
No sir. Not 5 years. They are taking whole service salary since 1995 or capped salary (whichever is lower) for calculation of pension. That is the reason most of the retirees after 35 years of service also are getting maximum Rs. 4000 as monthly pension. Even EPFO website online pension calculation also gives round about similar values. I am worred whether EPFO will apply the same logic at their discretion.
rl.bhutiani
1 year ago
I joined an exempted PSU in May 1980 and superannuated in March 2010. My previous service was as Scientific Officer - a central government post. However, these changes from FPS to EPF were never communicated to employees as such didn't even know about option for contribution on higher salary. This resulted in monthly pension of paltry sum of approx. Rs. 1,250/- . We really feel cheated due to lack of transparency by EPFO. Had I continued in previous employment, pension benefits would have been around 85 -90 K per month.
sundarbtw
Replied to rl.bhutiani comment 1 year ago
Mr. Bhutani, I hope you have applied online for enhanced pension. the window period for online application for enhanced pension for before 2014 retirees was over on March 3rd.
prkrishnan57
Replied to rl.bhutiani comment 1 year ago
Sir :
Move from FPS to EPS , or option to contribute higher salary etc. we also did not know and I presume almost everyone did not know. Otherwise why should we be having this situation today. Don't know who is responsible for this. EPFO or the Organisation who should have told their employees or even we ourselves (could we have tried to understand and ask - what we are doing today, could we have done at that time). Nevertheless still we can try now, as it has been cleared by SC, maybe in part.
I think while central govt employees get higher pension, they don't get employers contribution to Provident Fund. Correct me if I am wrong. If so, some trade off is there.
r_ashok41
1 year ago
looks very complicated and for a retired person how will one give so much money in one stroke
prkrishnan57
Replied to r_ashok41 comment 1 year ago
Once you understand it will not be complicated. Basically EPFO had a lower corpus earlier due to Cap based on which they worked out the pension which is very low. Now if you want higher pension, the corpus has to be increased too. Till now you paid 8.33% on capped amount. Now you have to pay on the actual basic salary which in most cases is very high than the capped amount. So you work out for each month the difference and deposit that with interest, to get higher pension.
dilipb.shah8
1 year ago
You are mentioning that revised pension difference may OR may not be given by EPFO. It is not fare and genuine. When then recovered the EPScontributions @ 8.33% on difference between cap salary and actual salary from the date of scheme introduced, such difference of revised pension should be compulsory effective from the date of our Superannuation ( pension date ). EPFO discretion ( government shahi/ amaldarshahi)would not be entertained .
prkrishnan57
Replied to dilipb.shah8 comment 1 year ago
As per the talk I had, if application is accepted, then you will get revised pension. Whether it will be retrospective effect or from next month, we don't know. That they have not clarified. But I personally feel it should be with arrears.
B_71
Replied to prkrishnan57 comment 1 year ago
Sir, Please let us know how to reach your offices to see if we can engage your services to apply as quite a few of us have complicated situation
prkrishnan57
Replied to B_71 comment 1 year ago
My mail id is given at the end of the article, you may contact me there
B_71
1 year ago
Thank you for a very good article. Is there a way to reach the author so that we can engage his services to apply.
prkrishnan57
Replied to B_71 comment 1 year ago
my email id is given in the end of the article, you may contact me.
harsh_61
1 year ago
Forget higher pension. I am not getting even the minimum entitlement from Bandra R. Office in Mumbai. There are so many complications and nobody from Bandra office, EPFiGMS, PG PORTAL is giving a proper reply. I really wonder why this EPFO is such a big mess? They are simply not bothered to answer e-mail and they give unworkable solutions when we register grievances. When we counter reply to their solutions mentioning our difficulties, the EPFiGMS simply and very adamantly again give you the same solution and close the grievance. I am victim of this vicious circle of lodging grievances and getting disposed off since last 15 months without any solution. Ministry of labour is also unhelpful. Are they looking for bribe to resolve our issues?
prkrishnan57
Replied to harsh_61 comment 1 year ago
You can put your specific queries. Wherever I am able to give a reply, I will respond.
Pawan Sood
1 year ago
Very comprehensive article. Thanks.
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