How Will the EPFO Ceiling Hike to Rs. 15000 Impact Your Pension and Benefits?

EPFO Circulars on Minimum Pension and Ceiling

After years of waiting, EPFO has released the circulars on the minimum pension as Rs. 1000 and the ceiling as Rs. 15000.

Pension Changes for Salaries Rs. 15000 and Above

For those earning a salary of Rs. 15000 and above, the following changes will be implemented:

- For those reaching the age of 58 on 30.9.2014, the pension will be increased by Rs. 39, with an additional contribution of Rs. 709 (1250-541).
- For those turning 58 on 30.11.2015, the pension will be raised by Rs. 668, reflecting 15 months of contributions, averaging Rs. 44.50 per month.
- For those hitting 58 on 30.11.2016, the pension will see an increase of Rs. 1257, based on 27 months of contributions, averaging Rs. 46.50 per month.
- For those celebrating their 58th birthday on 30.11.2017, the pension will rise by Rs. 1894, considering 39 months of contributions, averaging Rs. 48.50 per month.
- For those reaching 58 on 30.11.2018, the pension will go up by Rs. 2581, reflecting 51 months of contributions, averaging Rs. 50.60 per month.

After 5 years of contributions starting from 01.09.2014 (i.e., after 31.08.2019), the pension for pensionable service (i.e., service after 16.11.1995) will be 30/13 (nearly 2.3) times.

Regarding EDLI

The benefit in EPF, currently Rs. 130000, will be increased to Rs. 360000.

For the EDLI with insurance companies, the amount for natural death will be raised from Rs. 132000 to Rs. 362000, and for accidental death, it will be increased from Rs. 264000 to Rs. 724000.

Regards,
Abbas.P.S

I have gone through your posting and have some doubts about the calculations. For example, how did you arrive at the following:

"For those attaining 58 years on 30.11.2015, the pension will be increased by Rs. 668 for 15 months of contribution, i.e., an average of Rs. 44.50 for each month."

Regards,
Asok Kumar

Dear Asok Kumar, In my previous post, there was an oversight. Although I mentioned the salary as 15,000, I did not specify the service period, which might have led to your query.

In the previous post, I calculated based on service from the introduction of the Employees Pension Scheme, effective from 16.11.1995. Now, I will address the calculation mentioned in your query: "For those attaining 58 years on 30.11.2015, the pension will be increased by Rs. 668 for 15 months of contribution, i.e., an average of Rs. 44.50 for each month."

Service Calculation

Service from 16.11.1995 to 30.11.1995 = 20 years

Bonus on service = 2 years (for those completing 20 or more years, 2 years of bonus will be given)

Total Pensionable service 20+2 = 22 - (1)

Pensionable Salary Calculation

Pensionable salary is the average of the last drawn 60 months.

From 01.09.2014 to 30.11.2015, the number of months is 15, and the total salary for this period is 15x15000 = 225,000

Salary for the remaining 45 months (60-15) is 45x6500 = 292,500

Salary for the last 60 months is 225,000 + 292,500 = 517,500

The average salary is 517,500/60 = 8,625 - (2)

Pensionable Amount Calculation

Pensionable amount is Pensionable salary x Pensionable service / 70 = (1) x (2) / 70 = 8,625 x 22 / 70 = 2,710.71 rounded to 2,711 - (3)

Previous calculation with a salary of 6,500 is 6,500 x 22 / 70 = 2,042.86 rounded to 2,043 - (4)

The difference (3) - (4), 2,711 - 2,043 = 668 for 15 months (effective from 01.09.2014 to 30.11.2015)

One month average is 668/15 = 44.53.

Regards, Abbas.P.S

Dear Abbas, thanks a lot for such valuable posting. However, I am confused about the information below. Can you please clarify the following statement:

"With effect from 01.09.2014, wherever employer and employees have opted to contribute on salary exceeding Rs. 6,500 per month, such employer and employees will have to exercise a fresh option to contribute the government’s share of 1.16% on the salary exceeding Rs. 15,000 per month from his/her contribution," EPFO said in a circular to all its offices for implementation.

Regards,
Pranab Chakraborty
[Phone Number Removed For Privacy Reasons]

For a PF member, it is statutory to contribute to EPS on the actual salary up to the ceiling amount. There was a provision to opt for a contribution on the actual salary (i.e., beyond the ceiling limit) in accordance with the willingness of the employee and employer. In such conditions, the government is not liable to contribute their share of 1.16% as it is limited to the ceiling salary. Previously, the ceiling limit was ₹6,500. Now, the ceiling has been hiked to ₹15,000. As per the above notification, the said option is to be renewed. Failing to do so will result in the contribution being limited to the ceiling salary.

Regards,
Abbas.P.S