The Employees’ Provident Fund Organisation (EPFO) has made an important update that could increase pensions for certain retirees under the Employees’ Pension Scheme (EPS).
For some eligible members, pensions can now be calculated based on their actual full salary — not a capped wage limit.
This could mean a significantly higher monthly payout after retirement.
Here’s what has changed and who benefits.
How Pension Was Calculated Earlier
Under the EPF system, both the employee and employer contribute 12 percent of the basic salary to the provident fund.
From the employer’s share, 8.33 percent goes into the pension fund (EPS), while the remaining amount goes into the EPF account.
However, since 2014, there has been a wage ceiling of ₹15,000 per month for pension calculation.
This means even if someone earned more than ₹15,000, only that amount was considered for calculating their pension.
As a result, higher-paid employees saw their pension benefits limited.
What Has Changed Now
EPFO has now revived an earlier provision for certain eligible members.
If you were an EPF member before the 2014 wage cap and had opted to contribute to EPS based on your actual full salary, you may now receive pension based on that higher salary.
In simple terms, instead of calculating pension on ₹15,000, it can now be calculated on your real salary — if you qualify.
This can lead to a noticeable increase in monthly pension.
However, this benefit is not for everyone.
It applies mainly to those who:
Joined EPF before the 2014 rule change
Opted to contribute on their actual salary under earlier provisions
Meet specific eligibility conditions
Why This Update Is Important
For many retirees, pension is a key source of income after retirement.
If your salary was higher than ₹15,000 but your pension was calculated only on the capped amount, your retirement income would be lower than expected.
Now, eligible members can have their pension calculated on their true earnings.
Over time, this can make a substantial difference in financial security.
How Pension Is Calculated
The EPS pension formula remains the same:
Pension = (Average salary of last 60 months × Years of service) ÷ 70
Earlier, the “average salary” was limited by the wage ceiling.
With this update, eligible members can use their full salary in this formula — resulting in a higher pension amount.
Who Will Not Benefit
If you joined EPF after the 2014 wage cap came into effect, or if you did not opt for higher contributions earlier, this change may not apply to you.
That’s why it is important to check your EPFO records or consult your HR department to understand your eligibility.
The Bottom Line
EPFO’s latest update is a major relief for certain long-serving employees.
For those who qualify, pensions will now reflect actual salary levels rather than a capped figure.
This could significantly improve retirement income.
If you believe you may be eligible, reviewing your EPF contribution history could be a smart next step.
