EPFO News: Employees’ Provident Fund Organization (EPFO) is seriously considering a change in the existing formula for monthly pension determination. Under this, it is proposed to fix monthly pension on the basis of average pensionable salary received during the entire pensionable service. However, the final decision in this regard will be taken after the report of the actuary assessing the pension, the amount paid for it and the risk. A source related to the matter gave this information. At present, EPFO uses the formula ….. pensionable salary (average salary of last 60 months) times pensionable service / 70 …. for determination of monthly pension under Employees Pension Scheme (EPS-95).
Final decision after the report of the actuary
If sources are to be believed, there is a proposal to change the formula for monthly pension under EPS (95). In this, there is a plan to include the average pensionable salary received during the pensionable service in place of the average salary of the last 60 months of pensionable salary. However, he clarified, it is only at the proposal stage and no final decision has been taken on it yet. The final decision will be taken after the report of the actuary.
understand by example
It is worth mentioning that if EPFO changes the formula for pension, then it will certainly determine the monthly pension of all, including those who choose the option of high pension, less than the existing formula. It can be understood with an example. Let us assume that the average salary for the last 60 months of the person opting for higher pension is Rs 80,000 and his pensionable service is 32 years. In this case, his pension under the existing formula (80,000 times 32/70) will be Rs.36,571. On the other hand, when the average of salary is taken during the entire pensionable job, then the determination of monthly pension will be less because the salary (basic salary and dearness allowance) is less in the initial days of the job.
Online facility available for filling joint option form
It is noteworthy that in November last year, the Supreme Court had asked the government to give four months time to the shareholders to choose the option of higher pension. EPFO has provided online facility to the subscribers to fill the joint option form with the employers for opting for higher pension. The deadline for this was earlier May 3, 2023, which has been extended to June 26, 2023. At present, EPFO subscribers contribute a fixed limit of Rs 15,000 per month for pension, while their actual salary is much more than this. With the option of higher pension, they will be able to get higher monthly pension.
New formula being considered
Employees contribute 12 percent to the social security scheme of EPFO. At the same time, out of 12 percent contribution of the employer, 8.33 percent goes to EPS. The remaining 3.67 percent goes to the Employees’ Provident Fund. The government contributes 1.16 per cent as subsidy to the Employees’ Pension Scheme on a limit of Rs 15,000 basic salary. When asked about the need to change the formula, the source said- In fact, it is believed that giving more pension for a long time will lead to financial burden. That is why a new formula is being considered.
EPFO got interest of Rs 50,614 crore
In response to a question related to the Rs 6.89 lakh crore fund lying in the Pension Fund, the source said that this money does not belong only to the pensioners but to all the shareholders associated with the EPFO and the Employees’ Fund Organization has to take care of all. It is noteworthy that according to the 2021-22 report of EPFO, Rs 6,89,211 crore is deposited in the pension fund. EPFO received an interest of Rs 50,614 crore in 2021-22 on the EPS fund.
