EPFO Restores Higher EPS Pension Option: Who Qualifies and What It Means for Employees

In a significant move for select employees, the Employees' Provident Fund Organisation (EPFO) has reinstated the previously available higher pension option under the Employees' Pension Scheme (EPS). The clarification allows eligible members to contribute to the pension scheme based on their actual basic salary, but the benefit will apply only to a limited group of employees—not all EPFO subscribers.

The decision is being seen as an attempt to remove long-standing confusion around higher pension eligibility. However, experts stress that this is not a new benefit but a restoration of an earlier provision that existed before September 2014.

Background: What Changed in 2014

In September 2014, the government introduced a major amendment to the EPS framework. The pensionable salary cap—calculated as Basic Pay plus Dearness Allowance—was fixed at ₹15,000 per month. Alongside this, the minimum monthly pension was set at ₹1,000.

Because of the ₹15,000 ceiling, the maximum EPS pension effectively got limited to roughly ₹7,500 per month. This particularly affected employees earning above the threshold, as their pension calculations began to rely on the capped amount instead of their actual salary.

As a result, many higher-earning employees saw their potential retirement benefits shrink significantly.

What the Latest EPFO Clarification Says

Under the latest clarification, the government has revived the earlier provision that existed prior to September 2014. Eligible employees who had opted for the higher pension earlier can once again have their EPS contributions calculated on their actual basic salary and DA.

Importantly, this move does not introduce any fresh pension benefit. Instead, it simply restores the old mechanism for a specific set of members who had already exercised the option in time.

Who Will Benefit

The restored higher pension option will apply only to a narrowly defined group. Employees likely to benefit include:

• Those who opted for the higher EPS pension before 1 September 2014

• Members whose employers had agreed to contribute based on actual salary

• Individuals whose applications met the earlier eligibility conditions

For these employees, pension calculations may now reflect their real earnings, potentially improving retirement income.

Who Will Not Get the Benefit

A large number of EPFO members will remain outside the scope of this relief. The higher pension restoration will not apply to:

• Employees who did not choose the higher pension option before September 2014

• Most private-sector workers whose PF contributions continue to be capped at ₹15,000

• Members attempting to opt in without employer approval

Experts note that employees cannot exercise this option unilaterally. Employer consent remains mandatory.

How EPF and EPS Contributions Work

Under current EPFO rules, both employee and employer contribute 12% of the employee’s basic salary plus DA to the Provident Fund.

From the employer’s share:

• 8.33% (subject to a maximum of ₹1,250 per month) is diverted to the EPS pension fund

• The remaining portion goes into the EPF corpus

The pension paid after retirement depends largely on the pensionable salary and years of service. Therefore, allowing contributions on actual salary—where applicable—can meaningfully affect long-term retirement income.

Why This Matters

The reinstatement is expected to provide relief mainly to a small group of long-serving employees who had already exercised the higher pension option years ago. For the broader workforce, however, the existing ₹15,000 cap framework continues to apply.

Financial planners advise employees to review their EPF records and consult their employers or PF authorities if they believe they fall within the eligible category.

While the move clarifies EPFO’s stance and resolves lingering doubts, its real impact will remain limited to a specific pool of members rather than the entire subscriber base.