EPS-95 opting a Higher Pension What factors should be considered?
The pension amount under EPS 95 is primarily determined by two factors: length of service and average income over the previous five years.
EPS-95 opting a Higher Pension What factors should be considered?
Since November 4 2022, the EPS-95 Higher Pension has been the subject of much debate and discussion regarding its calculations.
Furthermore, the Hon’ble Supreme Court with its judgement dated 4.11.2022 ruled that the requirement for members to contribute 1.16% of their salary in excess of Rs.15000/- per month as an additional contribution under the amended scheme violated the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act,1952 (EPF & MP Act).
The Hon’ble Supreme Court directed the authorities to make the necessary changes to the Scheme within six months to make the EPS-95 scheme fesible for the EPFO subscriber who wants to opt for higher pension.
To carry out the aforesaid directive, all aspects of the problem, including legal and administrative aspects, were thoroughly investigated. It was decided by the EPFO board of trustees that as the Code on Social Security, 2020 (the Code) had already been notified, it would be appropriate to put relevant sections of the Code into effect.
Previously, section 142 of the Code was likewise operationalized as a single provision. The Code also calls for the repeal of the EPF and MP Acts. As a result, certain provisions of the EPF & MP Act are abolished while the corresponding provisions of the Code remain in effect.The spirit of the EPF & MP Act, as well as the Code, do not envisage employee payments to the pension fund.
As a result, in accordance with the objectives and spirit of the EPF & MP Act and the Code, it has been determined to deduct 1.16% of the employers’ overall 12% payment to the provident fund.
This provision is retroactive in nature and follows the orders of the Supreme Court. As a result, on May 3, 2023, the Ministry of Labour and Employment issued two notifications implementing the foregoing.
All of the orders of the Hon’ble Supreme Court contained in the judgement dated 04.11.2022 have been followed with the issuance of the above notifications.
EPFO Contribution Calculations for EPS-95
According to a notification published by the Labour Ministry, for members who choose a higher pension and whose application is accepted, the employer’s contribution to EPS would be 9.49 percent (i.e. 8.33% + 1.16 percent).
The additional payment of 1.16 percent on wages in excess of Rs 15000 would be deducted from the overall employer contribution of 12%. The employees’ EPF account will be adjusted as needed (i.e., the EPF corpus will be reduced and the increased monies will be sent to the EPS). This will be retroactive and will begin on September 1, 2014.
Employees who choose the higher pension would not be required to pay the additional 1.16% contribution on salaries beyond Rs 15,000 from their pay. This must be deducted from the employer’s overall 12% contribution to EPS and EPF.
The qualifying dues for EPS contributions with interest can be transferred from the EPF account if there is adequate balance, or deposited from the member’s bank account if there is a deficiency.
The Factors determining Higher Pension
The pension amount under EPS 95 is primarily determined by two factors: length of service and average income over the previous five years.
The increased EPS pension will be extremely beneficial to people who have seen a significant pay increase as they near retirement.
The greater your past five years’ basic wage, the larger your pension and the greater your return on additional contributions.
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