After the scrapping of the EPFO's notification that asked the EPS subscribers to be given full pension, the SC has upheld the Kerala High Court verdict on monthly pension from the Employees' Pension Scheme 95 on April 1.
And after the recent ruling, here's how you can stand to get more pension in your sunset years:
As per the current regime, EPS subscribers get a low amount of pension:
Here is how pension amount is decided for a subscriber.
Funds allocation to EPS
Of the 12% of basic pay and DA, the EPFO body transfers 8.33%s into EPS or employee pension scheme. But EPFO capped this contribution, which kept the pension low.
Computation of monthly pension amount
First and foremost, the pension amount is calculated based on the number of years that are put in by the employee as well as the last drawn salary. However, it comes to be meagre for the following reasons for the EPS subscriber:
1.For the computation of pension, the EPFO body capped the salary at Rs. 15,000 per month.
2. It also capped the contribution to the EPS. Instead of 8.33% of the employer's contribution, it was Rs 15,000 per year.
Employees covered by EPF will now be eligible for pension as per their full last drawn salaries.
Monthly pension = Number of years multiplied by last drawn salary divided by 70.
Relief for EPS subscribers with more pension
But in accordance with the new ruling after the Kerala High Court scraps the cap of Rs. 15,000 on basic salary, the subscriber will be able to get a pension as per their actual basic pay plus DA.
Considering that an individual's basic and DA as in the year 1999-2000 is Rs. 10,000 and then surged by 10% on a year-on-year basis and hence comes to be Rs 61,159 today.
So, individual will now get a pension in accordance with the last drawn salary i.e. Rs. 61,159 per month and not the earlier cap of Rs. 15,000.
How To Receive A Higher Pension?
But to receive a higher pension, an individual needs to make up for the shortfall in previous years and contribute a higher amount towards EPS or employee pension scheme.
And in the above-specified example for the last 20 years, an individual needs to transfer his corpus from the EPF account to the EPS which will be nearly Rs. 8.1 lakh, given the interest component. Post the transfer of the said amount, individual will be able to get a pension amount of Rs 17,474, which is higher by 300% in comparison to the pension of Rs. 4,285 that one would have received as per current rules.