Hopes For Higher EPS Pension May Be Dashed By New Calculation Rules: Report

Applicants seeking higher pension under the Employees' Pension Scheme (EPS 95) may reportedly face disappointment due to a purported new rule by the EPFO, which could result in significantly lower pension amounts.

What Happened: Although the EPFO has not officially confirmed this new methodology, the service period of EPS-95 members opting for higher pension might be divided into two segments, according to an Economic Times report. This division would impact the calculation of the average pensionable salary, potentially leading to a substantial reduction in pension payouts.

Under this proposed rule, the service period is bifurcated into two parts: one from November 16, 1995, to August 31, 2014, and the other from September 1, 2014, until retirement. The average salary for the last 60 months will be considered for each period, and the pension payable will be prorated accordingly.

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Lower Returns: The impact of this new calculation method could be significant, especially considering the historical difference in wage ceilings. Before September 2014, EPS contributions were capped at ₹6,500, whereas afterward, it was raised to ₹15,000. Consequently, the average pensionable salary for the earlier period is expected to be lower, potentially resulting in a notable reduction in overall pension amounts.

This approach, if implemented, could lead to a considerable decrease in pension payments, possibly ranging from 30% to 40%, compared to what was anticipated based on the Supreme Court’s judgment.

Supreme Court Ruling? Moreover, experts say such a rule seems to deviate from the spirit of the Supreme Court’s ruling, which reinstated the right of all eligible members to apply for higher pension without arbitrary cut-off dates. The EPFO’s apparent move to alter the pension calculation rule might be perceived as an indirect attempt to reduce pension amounts due to financial constraints, they suggested.

Members who have applied for higher pension are understandably concerned about the potential impact on their expected pension amounts. If the new methodology is indeed implemented, retirees may challenge it through legal channels, including the Supreme Court, to safeguard their interests.

As of now, the EPFO has not formally notified the new calculation rule, but it is crucial for the body to address the concerns of members awaiting higher pensions and provide clarity on the matter.

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