EPFO Higher Pension Scheme

Retirement planning is not just about saving—it’s about ensuring a steady income when your working years are behind you. To address concerns of low pension payouts, the Employees’ Provident Fund Organisation (EPFO) introduced the Higher Pension Scheme under the Employees’ Pension Scheme (EPS).
 

This provision lets employees contribute based on their actual salary (instead of the capped Rs. 15,000 limit), thereby increasing their monthly pension after retirement. For many, it’s a chance to secure a more comfortable post-retirement lifestyle.
 

Alongside this, building an additional corpus with Bajaj Finance Fixed Deposits (FDs) ensures you have a reliable and flexible income source beyond pensions.

• Enhanced pension: The Higher Pension Scheme allows EPF members to increase their pension contributions, leading to higher pension payouts post-retirement.
• Eligibility: Employees can opt for the scheme if they were members of EPF and EPS and meet certain criteria.
• Contribution based: Employees can contribute more to the EPS based on their actual salary instead of the existing salary cap.
• Addressing pension gaps: The scheme aims to provide better financial security to retirees, addressing concerns over inadequate pension funds.
• Voluntary option: The scheme is voluntary, and eligible members can choose to opt-in for higher pension bene 

The EPF Higher Pension Scheme is an option provided by the Employees' Provident Fund Organisation under the Employees’ Pension Scheme (EPS), allowing eligible members to receive a higher pension by contributing on their actual salary instead of the capped limit.
 

Earlier, EPS contributions were calculated on a salary ceiling of Rs. 15,000 per month, which restricted pension amounts, especially for higher-income employees. Under this scheme, employees can opt to contribute 8.33% of their actual basic salary (beyond Rs. 15,000) towards EPS, leading to a higher pension after retirement.
 

Following the Supreme Court EPFO higher pension ruling 2022, eligible EPF members were allowed to apply for this option. However, they must contribute additional amounts (including arrears with interest) to shift from the capped contribution.
 

This scheme is particularly beneficial for employees with higher salaries who want to maximise their post-retirement income, though it may reduce their EPF lump sum corpus due to higher allocation toward pension.
 

While EPS covers pension needs, a Bajaj Finance FD can serve as a parallel investment to meet goals like medical expenses or lifestyle needs with guaranteed returns. Earn up to 7.75% p.a. interest by investing in Bajaj Finance FD.
 

Also Read: What is Provident Fund

Key features of the EPF Higher Pension Scheme

1. Eligibility:

To be eligible for the Higher Pension Scheme, employees must have been contributing to the EPF and EPS under the scheme. They must also meet the criteria set by EPFO, including opting for the higher contribution before the cut-off dates specified by EPFO.

2. Voluntary scheme:

The scheme is voluntary, meaning employees who wish to increase their pension contributions can choose to opt in. It allows for greater flexibility in terms of the contribution to EPS.
 

3. Contribution beyond Rs. 15,000:

The key advantage of the Higher Pension Scheme is that it allows employees to contribute to EPS based on their actual salary, which can exceed Rs. 15,000, leading to a larger corpus for pension funds.

4. Higher payouts:

By contributing a larger amount to the pension scheme, employees can expect higher pension payouts upon retirement, helping to ensure a better standard of living post-retirement.

5. Regulatory changes:

The scheme has undergone several changes over the years, with the most recent ruling in 2023 allowing members who have been part of the EPF and EPS for many years to opt for the higher pension option retrospectively.

6. Opt-in process:

Employees wishing to avail of the higher pension option must apply through their respective EPF office, following the official procedure. This includes submitting necessary documents and paying the increased contribution.
 

For retirees, Bajaj Finance FD offers an interest rate of up to 7.75% p.a. (for senior citizens), ensuring stable income without market risks. Check eligibility. 

Following the 2014 amendment, several employees faced challenges regarding their pension contributions on higher salaries. Many were unaware of the need to submit a joint option with their employer to contribute 8.33% towards the Employees’ Pension Scheme (EPS) based on their actual salary. Although employers contributed based on higher wages, the EPFO still calculated pensionable salary using the wage cap of  Rs. 15,000.
 

Numerous employees approached High Courts and the Supreme Court, seeking a higher monthly pension. The apex court allowed eligible employees to claim higher EPS contributions by exercising the joint option within a specified time.

Supreme Court guidelines – Summary table

The Supreme Court allowed EPF members who joined before 01/09/2014 and hadn’t exercised the joint option to do so by 03/05/2023, later extended by EPFO to 11/07/2023. For such cases, higher pension under EPS will be calculated from the employee’s joining date.

Example: How EPFO will recalculate EPS

• Mr. X joined EPF in 1998 but did not exercise the joint option.
• From 2015, his monthly salary increased to Rs. 50,000.
• His employer contributed Rs. 6,000 (12% of salary) monthly to EPF.
• From this, Rs. 1,250 (8.33% of Rs. 15,000 cap) went to EPS, and the remaining Rs. 4,750 to EPF.
• Upon exercising the joint option before 11/07/2023, the EPS share becomes Rs. 4,165 (8.33% of Rs. 50,000), and only Rs. 1,835 will go to EPF.
• The EPFO will adjust this by shifting the EPS shortfall from his EPF balance retroactively—from his joining date or from 01/11/1995, whichever is later.

Note: Opting for a higher pension reduces the final EPF lump sum available at retirement, as more contributions are routed into the EPS.

Key features of the Higher Pension Contribution under EPS:

1. Voluntary opt-in: Employees who wish to contribute more towards their pension can voluntarily opt for the higher contribution scheme. It is not mandatory but provides an opportunity for higher-income employees to ensure better pension benefits.
2. Salary-based contribution: The primary benefit of the higher pension contribution is that employees can contribute based on their actual salary, which can exceed the Rs. 15,000 cap. This ensures a more accurate pension calculation, reflecting a higher income.
3. Pension boost: By increasing the contribution to EPS, employees will receive a higher pension after retirement. This is particularly advantageous for employees earning above the Rs. 15,000 threshold, as the previous scheme limited their pension potential.
4. Eligibility criteria: To avail of the higher pension scheme, employees must meet certain eligibility conditions, such as having contributed to both EPF and EPS, and fulfilling any additional requirements set by EPFO.
5. Regulatory changes: The scheme underwent significant changes, including a ruling in 2023 allowing employees to contribute to the EPS retrospectively. This allows those who had previously contributed based on the Rs. 15,000 salary cap to apply for the higher pension scheme and revise their pension amount.
6. Opt-in process: Employees interested in opting for a higher pension contribution need to submit a formal request through their EPF office, along with required documentation and payment of the higher contribution.

The Higher Pension Scheme was introduced to provide greater benefits to employees, enabling them to increase their pension fund contributions and receive better pension payouts. This scheme allows employees to contribute based on their actual salary, which helps ensure a pension that reflects their income and standard of living.

Key features:

1. Voluntary Scheme:
   The scheme is voluntary, meaning employees are not automatically enrolled. Employees can choose to opt-in and increase their contribution to the pension scheme, ensuring a higher pension after
2. Retrospective Application:
   The scheme allows employees to apply for the higher pension contributions retrospectively. Those who were already contributing based on the Rs. 15,000 limit can now make adjustments to their previous contributions and increase their pension fund.
3. Simple Application Process:
   Employees interested in availing of the Higher Pension Scheme can apply by submitting a request through their EPF office. The process includes verifying salary details, submitting documents, and making the necessary contributions.
4. Financial Security in Retirement:
   The Higher Pension Scheme aims to provide a more secure financial future for employees after they retire. With higher pension payouts, employees can ensure a better standard of living during their retirement years.

The Higher Pension Scheme is a voluntary scheme, giving employees the option to enhance their pension contributions. Employees who wish to contribute more toward their pension can opt for this scheme, ensuring they enjoy a better standard of living post-retirement.

Here are some of the guidelines you need to keep in mind for EPFO higher pension scheme:

• Joint option is mandatory
  Eligible employees must submit a joint option form with their employer to opt for a higher pension under EPS. This is a key requirement for processing the request.
• Eligibility based on EPS membership
  Only employees who were part of EPS before or after 1 September 2014 (based on conditions) can apply for the higher pension option.
• Online application process
  Applicants need to apply through the EPFO Unified Member Portal under the “Pension on Higher Salary” option by submitting required details.
• Higher contribution requirement
  Members must contribute 8.33% of their actual salary (beyond ₹15,000 cap), with adjustments made from EPF balance along with interest.
• Consent for fund reallocation
  Employees must provide consent for transferring a portion of their EPF corpus to EPS to cover past contribution gaps.
• Verification by EPFO
  EPFO authorities verify applications, salary details, and employer approval before granting higher pension benefits.
• Deadline and updates
  EPFO has provided multiple deadlines for submission and approval of applications, with extensions granted for pending cases in recent updates. 

The Higher Pension Contribution under EPS is a significant improvement in the pension scheme, offering employees the chance to increase their pension payouts by contributing more based on their actual salary. It provides a path towards better financial security after retirement, especially for those earning above the Rs. 15,000 threshold. With its voluntary nature and flexibility in contribution, this scheme allows employees to plan their retirement finances effectively and ensures they have a higher corpus to rely on during their post-retirement years.

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 7.75% p.a.