The Modi government may reportedly consider acting on appeals by private sector employees covered under the Employees’ Provident Fund Organisation (EPFO) for an increase in the minimum pension, which is currently fixed at Rs 1,000 per month. For this, a delegation of EPS-95 pensioners met Finance Minister Nirmala Sitharaman on January 10, 2025 as part of the pre-budget consultation meeting, reports Financial Express.

Minimum monthly pension should be Rs 7,500

Their request was for a minimum monthly pension of Rs 7,500, an increase in dearness allowance (DA) and free medical treatment for both pensioners and their spouses. Nirmala Sitharaman assured the EPS-95 National Movement Committee that their demands would be reviewed.

The report said trade unions also met the finance minister during the session but advocated for increasing the pension to Rs 5,000 per month. This attracted criticism from the EPS-95 National Movement Committee, which considered the amount inadequate, unfair and not enough to meet the basic needs of pensioners.

More than 36.60 lakh pensioners do not get minimum monthly pension

The report quoted EPFO ​​as claiming that despite the government’s announcement of fixing the minimum monthly pension at Rs 1,000 in 2014, over 36.60 lakh pensioners still get less than this amount.

How much of PF goes into Employee Pension Scheme

EPF members contribute 12% of their basic salary to the provident fund, while the employer contributes an equal amount. The employer’s contribution itself is divided into two parts, with 8.33% allocated to the Employees’ Pension Scheme (EPS), while 3.67% goes towards the EPF scheme.

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It has been proposed to increase the salary limit for the calculation of Provident Fund and Pension Contribution under the Employees’ Provident Fund Organization (EPFO).

Sources have said that the Finance Ministry may soon take a decision on the proposal received from the Ministry of Labor. In this proposal, the Ministry of Labor has recommended increasing the salary limit from the current Rs 15,000 to Rs 21,000.

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Pension and EPF contributions will be directly affected

According to sources, the proposal (to increase the salary limit for EPF contribution) was sent in April and the Finance Ministry will take a final decision on it soon. The Employees’ Pension Scheme (EPS) managed by the EPFO ​​has a salary limit of Rs 15,000 for pension calculation from September 1, 2014. However, the proposed increase may provide much-needed relief and better benefits to private sector employees.

If the proposal to increase the salary limit from Rs 15,000 to Rs 21,000 is approved, it will have several implications on the pension and EPF contributions of private sector employees.

How is EPF pension calculated

A special formula is used to calculate EPS pension. This formula is – Average Salary x Pensionable Service / 70. Let us tell you that here average salary means the employee’s ‘basic salary’ + ‘dearness allowance’. Apart from this, the maximum pensionable service is 35 years. Currently, the current salary limit (pensionable salary) is Rs 15,000. Now if we calculate with these figures, then the current EPS pension is 15,000 x35/70 = Rs 7,500 per month.

In-hand salary will decrease

If the salary limit is increased from Rs 15,000 to Rs 21,000, then the pension received by the employees will be Rs 21,000×35/70 = Rs 10,050 per month. That is, after the new rules, the employees will get an extra pension of Rs 2550 every month. However, one more thing to note here is that after the new rules, the in-hand salary of the employees will decrease slightly because after the implementation of the new rules, there will be more deduction for EPF and EPS from the employee’s salary than now.

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