EPFO has announced good news before April, with the return of this robust pension benefit.

In the new change, EPFO ​​has clarified that this is not a new scheme, but rather a reinstatement of an existing provision. Employees who opted for a higher pension before September 1, 2014, can benefit.

There's significant relief for employees working in the private sector. The Employees Provident Fund Organization (EPFO) has reinstated the old provision regarding higher pensions. Under this provision, some employees will again have the option to contribute more to their pension based on their actual basic salary and dearness allowance.

Prior to September 1, 2014, employees had this option, but they made pension contributions based on their actual salary rather than the fixed salary limit. PSU employees, in particular, had taken advantage of this facility. However, in 2014, the government fixed the maximum pensionable salary limit at ₹15,000. With this, the minimum monthly pension was set at ₹1,000, and the maximum pension was limited to approximately ₹7,500. The option to contribute higher based on actual salary was effectively discontinued.

What changes have occurred now?

In the new changes, the EPFO ​​has clarified that this is not a new scheme, but rather a reinstatement of an existing provision. Now, employees who had opted for a higher pension option before September 1, 2014, will be able to contribute based on their basic salary. However, this feature will not apply to all members. Only those employees who had previously opted for this option and whose employers agree to contribute higher contributions will be able to benefit from this. Employees who earned salaries above this limit after 2014 cannot base their pension contributions on their actual basic salary, limiting their potential pension benefits.

What are the current rules for EPF and EPS?

According to current rules, both employees and employers contribute 12 percent of their basic salary and salary (DA) to the EPF. Of the employer's share, 8.33 percent goes to the Employees' Pension Scheme, while the remaining 3.67 percent is deposited into the PF account. Pension calculations are based on the pensionable salary, which is currently capped at ₹15,000. Consequently, most employees receive a limited pension.

Who will benefit from these changes?

This restoration is primarily believed to benefit employees in the organized sector or PSUs who opted for a higher pension before 2014. New employees or those whose contributions have been based on the fixed salary limit will not automatically benefit. Experts believe this move will address some of the confusion that has persisted since the salary limit was established in 2014. However, it is believed that its impact will be felt only by a limited number of people.