New Delhi: The Employees’ Provident Fund Organisation (EPFO) has recently updated how pensions are calculated for some workers under the Employees’ Pension Scheme (EPS). This change can help certain retirees receive a higher pension amount based on their actual salary, rather than a capped wage limit.
How EPFO Pension Used to Work
Under the existing system, both the employer and employee contribute 12 percent of the basic salary each to the Employees’ Provident Fund (EPF). Out of the employer’s share, 8.33 percent goes to the pension fund (EPS) and the rest to the EPF account.
However, since a 2014 rule change, there was a wage ceiling on how much salary could be used to calculate the pension. That means even if a person earned more, only up to a Rs 15,000 monthly wage was considered for pension purposes. This limited the pension amount for higher-paid employees.
What’s Changed With the New Rule
Now, the EPFO has revived an earlier provision that allows certain eligible members to get pension based on their full actual salary, not just the capped amount.
Here’s what that means:
Previously, only employees earning up to the wage ceiling (Rs 15,000/month) could have their full salary counted for EPS.
Employees who were members before the 2014 wage cap change and had opted to contribute on their actual full salary can now continue to receive their pension based on that higher salary.
This means their pension payouts can be significantly higher than they would have been using the old cap.
However, it’s important to note that this benefit applies only to a limited group of workers — especially those who were already contributing on their actual salary and met the eligibility criteria under the earlier rules.
Why This Matters
For many EPFO members, the pension they receive after retirement depends heavily on how much of their salary was counted for pension contributions. For those earning more than ₹15,000 per month, the old cap limited their future benefits. Under the new update, eligible members can finally get a pension based on their true earnings, which can make a noticeable difference in retirement income.
Who Will Benefit
This change specifically helps:
Workers who joined EPF before the 2014 salary cap and continued contributing afterward.
People who had chosen the option to contribute based on their actual salary rather than the capped amount before the rule was removed in 2014.
If you did not opt in earlier, or if you joined EPF after the 2014 cap came into force, you may not be eligible for a revised pension under this update.
How Pension Is Calculated Now
Under EPS, the pension is usually calculated using this formula:
Pension = (Average of last 60 months’ salary × Years of service) ÷ 70
In the past, this average was limited by the wage ceiling. But now, eligible members can use their full salary for this calculation — meaning the pension can be much larger.
Bottom Line
The recent rule change from the EPFO allows certain long-serving members to receive an enhanced pension based on their actual salary, rather than a capped amount. This is a big deal for those eligible, as it can raise retirement income significantly — but it does not apply to everyone. If you’re unsure whether you qualify, it’s worth checking your EPFO account or speaking with your HR department.
