Employees' Provident Fund Organization (EPFO) members are eligible for a pension following retirement. Via the unified members' portal of the retirement fund organisation EPFO, all eligible members have until May 3, 2023, to choose and apply jointly with their employers for increased pensions.
Presently, 12% of each employee's base pay and dearness allowance is contributed by their employers to the EPF. 8.33% of the 12% employer contribution goes to the Employees' Pension Scheme (EPS) and 3.67% to the Employees' Provident Fund (EPF).
What is EPFO's higher pension scheme?
A pension programme was established by the government in 1995 under Section 6A of the EPF Act. According to the Employees Pension System of 1995 (EPS-95), an employer contribution of 8.33% should be made to the pension plan. The maximum monthly pension was set at Rs. 5,000 or Rs. 6,000 by the EPS-95. Employers were required to pay 8.33% of the initial Rs. 5,000 (which was later increased to Rs. 6,500) towards the pension plan.
(Also Read: What is Pre-EMI and Full EMI repayment schemes for home loans? Know difference and which is better)
Here is an example to know how much pension you can receive by opting for the EPFO higher pension option.
For instance, your basic pay is 40,000 now every month, and 12% of your Basic Salary (Rs 4800) is transferred to your EPF account. EPS receives Rs. 1250 of the employer's contribution, which is also equal to 12% of your basic salary, and your EPF account receives the remaining Rs. 3550.
If you choose the higher pension, the pension that will be given to you when you retire will be determined using your real Basic Salary plus Dearness Allowance (if applicable). For instance, the pension would be Rs 18,857 [(Rs 40000*33)/70] if your average pensionable pay (Basic + DA) during the previous 60 months was Rs 40,000 at the time of retirement.
