The recent decision by the Employees Provident Fund Organisation (EPFO) to implement a pro-rata system for calculating higher pensions has raised concerns. It is anticipated that this move will result in nearly a one-third reduction in pension amounts for subscribers who opted for the higher pension scheme. The impact is estimated to affect over 13 lakh EPFO members who retired after September 1, 2014, along with current employees who chose this scheme.

 

Under the pro-rata system, pensions for this category of members would be calculated separately for the service before and after September 2014. This marks a departure from the previous system, where pensions were based on the average salary of the 60 months preceding retirement. Consequently, the implementation of the pro-rata system means that members will not receive the full pension amount proportionate to the high salary earned at the time of retirement.

 

Despite a Supreme Court order on November 4 last year mandating higher pensions, the EPFO informed the Central Board of Trustees that there was no specific formula for calculating higher pensions proportional to salary in the EPF pension scheme (EPS 95). Consequently, the method for calculating higher pensions aligns with the approach for members currently contributing their share to the pension fund, according to the EPFO. However, this detail was not disclosed in the circular issued on June 1 this year, outlining the procedure for calculating higher pensions.

 

The EPFO's regional office in Salem responded to the Airports Authority of India, stating that the pension amount was calculated based on the pro-rata system.

 

Pro-Rata System Details: Under the pro-rata system, pensions are calculated separately from November 1995 (when EPS was launched) to September 2014 and during the period afterward. The maximum contribution to the pension till August 31, 2014, was based on a salary of Rs 6,500, and it increased to Rs 15,000 afterward.

 

It's emphasized that those opting for higher pensions had to contribute 8.33% of their gross salary to the pension fund from the scheme's launch. Members argue that since the same contribution was required before and after September 2014, it is unfair to calculate different pensions based on this date.

 

This move has sparked discontent among affected members, adding to the ongoing discourse around pension calculations and their alignment with salary variations over the years.