08/04/2023, 16:49 Higher Pension Scheme in EPFO: Guidelines, Form, Calculation, Formula, Eligibility, Benefits

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EPFO Higher Pension Scheme: Guidelines, Form,

Calculation, Formula, Eligibility, Benefits
Updated on: Mar 1st, 2023 - 6:38:30 PM

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Employees’ Provident Fund Organisation (EPFO) members are entitled to a pension after retirement. Currently, the

employees and employers contribute 12% of their 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 8.33% EPS contribution is capped at the maximum amount of Rs.15,000 even when the employee draws

a higher salary. The cap on the EPS contribution was introduced in 2014 through an amendment to the EPS.

Before the EPS amendment in 2014, employees had the option to choose higher EPS contribution amounts. This article

covers the EPFO circular on higher pensions and its claim process.

What is the EPF higher pension scheme?

In 1995, the Government introduced a pension scheme under Section 6A of the EPF Act. The Employees Pension

Scheme, 1995 (EPS-95) provided that the employer’s contribution of 8.33% should be towards the pension scheme. The

EPS-95 capped the maximum monthly pension at Rs.5,000 or Rs.6,000. Thus, employers had to contribute 8.33% of

Rs.5,000, which was later raised to Rs.6,500, towards the pension scheme.

In March 1996, a provision was added to para 11(3) of the EPS-95, giving the employer and employee an option to

contribute 8.33% of actual salary (above the cap of Rs.5,000 or Rs.6,500) to the EPS. Such a higher salary would be

considered a pensionable salary. However, the EPFO gave six months for the employees to file a joint option form for

higher pension contributions to the EPS.

The government amended the EPS-95 scheme effective from 01/09/2014. It increased the maximum pensionable

salary to Rs.15,000. It also omitted the provision to para 11(3), i.e. exercise of the option by the employer and employee

to contribute EPS on a higher salary amount.

Thus, employers would make an EPS contribution of 8.33% on a maximum of Rs.15,000 for the employees joining the

EPF scheme after 01/09/2014, even when they draw a higher salary.

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However, the employees who were part of EPS-95 or joined before 01/09/2014 could contribute 8.33% to EPS on the

actual salary as against the cap of Rs.15,000 if they filed a new joint option with the EPFO within six months, i.e.

28/02/2015.

Higher pension contribution under EPS

There were issues after the 2014 amendment regarding pension contributions on higher salaries. Many employees

stated that they did know about the exercise of the joint option for contributing pension on the higher salary amount.

The EPFO rejected the joint option filed by many employees. Employers contributed 8.33% of pension on employees’

actual salaries without filing the joint option, but the pensionable salary was taken as Rs.15,000 for pension

calculation.

Thus, many employees filed cases in High Courts for receiving higher pensions based on the contributions made on

actual salary amounts. The Supreme Court took up this matter. The summary of the Supreme Court decision is as

follows:

Status of Exercise of joint Eligibility to claim Mode of higher

Employee option  8.33% pension pension claim

contribution on a

higher salary

Employees in Exercised joint Yes  By filing a higher

service as on option and pension claim

01/09/2014  rejected by the application

EPFO 

Employees in Not exercised joint Yes By exercising the

service as on option but joint option within

01/09/2014  contributing to EPS 03/05/2023

above the cap of

Rs.5,000/Rs,6,500

Employees retired Exercised joint Yes By filing a joint

before 01/09/2014 option and option and higher

rejected by the pension claim

EPFO application

Employees retired Not exercised joint No Not applicable

before 01/09/2014 option 

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The Supreme Court provided that employees who were part of the EPF before 01/09/2014 but have not exercised the

joint option can exercise it within 03/05/2023. For such employees, a higher EPS contribution will be calculated from

the date of their joining. 

For example: 

Mr. ‘X’ became a member of the EPF in 1998.

He has not exercised the joint option.

His salary increased to Rs.50,000 in 2015.

His employer contributes Rs.6,000 (i.e. 12% of his basic wage) towards EPF. 

Of the employer’s contribution, Rs.1,250 (i.e. 8.33% of Rs.15,000; the statutory wage cap) will go to the EPS. 

The remaining Rs.4,750 (i.e. Rs.6,000 - Rs.1,250) will go to the EPF. 

He exercises the joint option within 03/05/2023 as per the Supreme Court judgement since the EPS contribution

is above the statutory wage cap of Rs.6,500.

After submitting the joint option, his employer will contribute Rs.4,165 (i.e. 8.33% of Rs.50,000; his actual salary)

and Rs.1,835 (Rs.6,000 - Rs.4,165) towards EPF.

The EPFO will calculate the monthly EPS amount of 8.33% of the actual salary and transfer the difference amount

from the EPF to the EPS.

In such cases, the EPFO will return to the joining date or 01/11/1995, whichever is later, and transfer the difference from

the PF account to the EPS account. But, the higher pension contribution will reduce the EPF lumpsum corpus that the

employee gets upon retirement.

EPF higher pension eligibility

EPFO issued a circular in December 2022 providing the eligibility criteria and application process for claiming a

higher pension. Below are the eligibility criteria for a higher pension:

The employees retired before 01/09/2014.

The employees exercised the joint option under para 11(3) of EPS-95 while being a member of EPS-95.

The employees and employers contributed EPS on salaries exceeding the wage ceiling of Rs.5,000 or Rs.6,500.

The EPFO declined the exercise of such an option.

However, the EPFO circular did not provide a higher pension option for employees who were part of the EPF before

01/09/2014 but still working/retired after 2014. As per the Supreme Court judgement, such employees were also

eligible to claim a higher pension.

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Thus, the EPFO issued another circular in February mentioning higher pension eligibility criteria for employees in

service/retired after 2014. Below are the eligibility criteria to file a joint option for getting a higher pension:

The employees who were members before 01/09/2014 continued to be members after that date.

The employees and employers contributed to EPS on salaries exceeding the wage ceiling of Rs.5,000 or Rs.6,500.

The employees and employers were members of EPS-95 and did not exercise the joint option provided under the

deleted para 11(3) of the EPS and amendment of 2014.

However, employees who were members of EPS-95 and exercised the joint options under the deleted para 11(3) of the

EPS but did not file new joint options after the amendment of 2014 are not eligible to claim a higher pension. The EPS

contributions of such employees will be 8.33% on the maximum amount of Rs.15,000, irrespective of their actual

salaries.

How to apply for a higher pension in EPF?

The employees should apply the joint option/higher pension claim application specified by the concerned Regional

Provident Fund Commissioner (RPFC). The EPFO has released a URL to apply online.

Below is the step to claim a higher pension amount/contribution:

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

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

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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.

The EPFO will digitally register each application and provide the receipt number to the applicant. It will forward the

applications to the respective employers, who will verify them through e-sign/digital signature for further processing.

The RPFC will convert all applications into e-files.

The concerned dealing assistant will examine the papers and forward the case to the section account

officer/supervisor. The concerned account officer/supervisor will mark discrepancies after examination and send them

to the Assistant Provident Fund Commissioners (APFC)/RPFC-II. 

The APFC/RPFC-II will examine the case and send the higher pension decision to the applicants via email, post,

phone or SMS. 

EPF higher pension option form

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The eligible employees who retired before 2014 can apply for a higher pension claim with the EPFO. They can apply

for the higher pension claim online or with the regional EPF offices.

The eligible employees who joined EPS-95 but are retired/working after 2014 can apply the joint option form online

or with the concerned regional EPF offices within 03/05/2023 to receive higher pensions.

EPFO guidelines for higher pension

The joint option/higher pension claim application should contain a disclaimer or declaration.

An employee should give explicit consent in the joint option/application form for a share adjustment from PF to

EPS and a re-deposit of the amount.

An employee should give an undertaking of the trustee for a share transfer of funds from exempted PF trust to

the EPFO pension fund. The undertaking will be effective for the deposit of due contribution and interest up to

the payment date within the specified time.

The employer’s contribution share refund will be deposited with the interest rate declared under para 60 of the

EPF Scheme, 1952, for employees of unexempted establishments.

The following documents should be submitted with the higher pension claim application:

Proof of joint option verified by the employer filed under para 26(6) of the EPF scheme.

Proof of joint option verified by the employer filed under para 11(3) provision.

Proof of remittance of EPS contribution in the PF account exceeding the current wage limit of Rs.6,500 or

Rs.5,000.

Written refusal of APFC or EPFO to such remittance or request.

The following documents should be submitted with the joint option application:

Proof of remittance of EPS contribution in the PF account exceeding the current wage limit of Rs.6,500 or

Rs.5,000.

Proof of joint option verified by the employer filed under para 26(6) of the EPF scheme.

The EPFO will issue further circulars regarding the deposit method and pension computation.

An employee can raise a complaint on EPFiGMS when they face a grievance to get a higher pension after

submitting the application and payment of the due contribution if any.

EPF higher pension calculation formula

The EPS pension formula is as follows: 

Monthly pension amount = (Pensionable salary X pensionable service)/70

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Pensionable salary means the average of the last 60 months’ salary. 

Pensionable service means the number of years contributions were made to the EPS account.

If an employee superannuates at 58 years after rendering pensionable service of more than 20 years, a weightage of

2 years will be added to the service period. However, the maximum pensionable service is limited to 35 years. 

Let’s look at how the monthly pension amount is calculated using the above formula:

Mr. ‘X ‘exercised the joint option to receive a higher pension.

His average monthly salary has been Rs.50,000 for the last five years. 

He rendered services for 25 years. 

He superannuated at 58 years.

As per the pension calculation formula, the monthly pension amount will be Rs.19,285 [i.e. 50000 x 27 (25+2)]/70]

EPF higher pension calculation 

The current monthly EPS calculation on the cap of Rs.15,000 is provided below:

Salary Employer’s EPF EPS contribution of EPF contribution

contribution  8.33% on Rs.15,000

Rs.1,00,000 12,000 1,250 10,750

Whereas, the monthly EPS calculation on the actual salary is as follows:

Salary Employer’s EPF EPS contribution EPF contribution

contribution  on actual salary

Rs.1,00,000 12,000 8,330 3,670

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Thus, you will get more monthly EPS contribution when you file a joint option since it is contributed on your actual

salary. When you apply for a higher pension, the extra amount, i.e. 7,080 (1,250-8,330), will be transferred from the

employee’s EPF to EPS for the entire service period (i.e., date of joining the employment till the retirement date). 

Employees will receive the below monthly pension when they do not file for a joint option:

‘X’ joined EPF when he was 25 years.

He retired at 58 years.

The pensionable salary will be Rs.15,000.

The pensionable service is 33.

Thus, he will receive a monthly pension of Rs.7,071 [(Rs.15,000 x 33)/70].

Employees will receive the below monthly pension when they file the joint option:

‘X’ joined EPF when he was 25 years.

He retired at 58 years.

The pensionable salary will be Rs.40,000.

The pensionable service is 33.

Thus, he will receive a monthly pension of Rs.18,857 [(Rs.40,000 x 33)/70].

However, the EPFO will soon release a pension calculation circular which will explain the pension an employee can get

by opting for a higher pension.

Frequently Asked Questions

How to get a higher pension from EPF?

Eligible employees should submit the joint claim or higher pension claim application to the concerned regional PF

commissioners to get a higher pension.

How to opt for a higher pension in EPFO?

Employees who are members of the EPS-95 and are in service/retired after 2014 can opt for a higher pension by filing

a joint option application with the regional PF commissioner before 03/05/2023.

Who is eligible to receive a higher pension in EPFO?

The following employees are eligible for a higher pension in EPFO:

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Employees retired before 01/09/2014 -

Who opted for a higher pension under the provision of para 11 (3) of the EPS-95.

The EPFO rejected the option exercised under para 11(3) of the EPS-95.

The pension contribution was made above the maximum limit of Rs.5,000 or Rs.6500.

 Employees retired/working after 01/09/2014 -

Who were members of the EPS-95 and did not opt for a higher pension.

The pension contribution was made above the maximum limit of Rs.5,000 or Rs,6500.

How to calculate EPF higher pension?

The formula for calculating EPF higher pension is as follows: Monthly pension amount = (Pensionable salary X

pensionable service)/70. The EPF will soon issue a circular showing the mode of calculating higher pensions.

Is the higher pension scheme beneficial?

It benefits individuals who want a higher monthly pension but do not require a huge lump sum upon retirement. The

higher pension contribution will increase the monthly pension amount but reduce the EPF lump sum given to an

employee upon retirement. Thus, individuals who have other investments and will receive a lump sum upon its maturity

can opt for the higher pension scheme. However, the monthly pension is taxable, but the lumpsum EPF amount given

after retirement is tax-exempt.

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