The Employees’ Pension Scheme (EPS) is a retirement benefit scheme that was introduced by the Government of India in 1995. The scheme is open to all employees who are earning a monthly salary of up to Rs.15,000. Under the scheme, employees contribute 8.33% of their salary, and the employer contributes an equal amount. The contributions are used to purchase units in the National Pension System (NPS).

In 2014, the Government of India introduced the Employees’ Pension (Amendment) Scheme, 2014. This amendment scheme increased the pensionable salary under the EPS from Rs.6,500 to Rs.15,000. This meant that more employees would be eligible to join the scheme, and they would also be able to contribute a higher amount.

The amendment scheme also introduced the option for employees to opt for a higher pension. Under this option, employees can contribute an additional 1.16% of their salary. This will increase their pension by 20%.

The Supreme Court of India has upheld the validity of the Employees’ Pension (Amendment) Scheme, 2014. In a judgment that was delivered in November 2022, the Supreme Court ruled that the amendment scheme is constitutional and that it does not violate the rights of employees.

The Supreme Court’s judgment is a major victory for the employees who had challenged the amendment scheme. The judgment will ensure that more employees are eligible to join the EPS and that they will be able to receive a higher pension.

The higher pension schemes are a welcome development for employees in India. These schemes will provide employees with a more secure retirement and will help them to meet their financial needs in old age. The Supreme Court’s judgment has ensured that these schemes will be available to more employees and that they will be able to benefit from them.

Here are some of the benefits of the higher pension schemes:

• Increased pension: Employees who opt for the higher pension option will receive a pension that is 20% higher than the pension that they would receive under the regular EPS scheme. This will provide them with a more secure retirement and will help them to meet their financial needs in old age.
• More eligible employees: The amendment scheme has increased the pensionable salary under the EPS from Rs.6,500 to Rs.15,000. This means that more employees will be eligible to join the scheme and will be able to benefit from the higher pension.
• Flexibility: Employees have the option to choose whether or not to opt for the higher pension. This gives them the flexibility to decide what is best for them and their financial situation.

The higher pension schemes are a positive development for employees in India. They will provide employees with a more secure retirement and will help them to meet their financial needs in old age. The Supreme Court’s judgment has ensured that these schemes will be available to more employees and that they will be able to benefit from them.

Here are some of the challenges that may be faced in implementing the higher pension schemes:

• Cost: The higher pension schemes will be more expensive for the government and for employers. This may be a challenge, especially in the current economic climate.
• Administration: The higher pension schemes will be more complex to administer than the regular EPS scheme. This may be a challenge for the Employees’ Provident Fund Organization (EPFO).
• Compliance: Employees and employers will need to comply with the new rules and regulations of the higher pension schemes. This may be a challenge, especially for small businesses.

Despite the challenges, the higher pension schemes are a positive development for employees in India. They will provide employees with a more secure retirement and will help them to meet their financial needs in old age. The Supreme Court’s judgment has ensured that these schemes will be available to more employees and that they will be able to benefit from them.

Table showing the differences between the normal pension scheme and the higher pension scheme:

Feature	Normal Pension Scheme	Higher Pension Scheme
Pensionable salary	Up to Rs.6,500	Up to Rs.15,000
Employee contribution	8.33%	8.33% + 1.16% (additional contribution)
Employer contribution	8.33%	8.33%
Pension amount	50% of the average of the last 36 months’ salary	60% of the average of the last 36 months’ salary
Eligibility	Employees who are earning a monthly salary of up to Rs.6,500	Employees who are earning a monthly salary of up to Rs.15,000
Joining age	18 years	18 years
Retirement age	58 years	58 years
Number of years of service required	10 years	10 years
Exit option	Employees can withdraw their pension fund after 60 years of age	Employees can withdraw their pension fund after 60 years of age
Death benefit	The nominee of the deceased employee will receive the entire pension fund	The nominee of the deceased employee will receive the entire pension fund
Disability benefit	The disabled employee will receive a monthly pension for life	The disabled employee will receive a monthly pension for life

As you can see, the higher pension scheme offers a number of advantages over the normal pension scheme. These advantages include a higher pension amount, a lower joining age, and a shorter period of service required. Employees who are eligible for the higher pension scheme should strongly consider opting for it, as it will provide them with a more secure retirement.

It is important to note that the higher pension scheme is not available to all employees. Only employees who are earning a monthly salary of up to Rs.15,000 are eligible for the higher pension scheme. Employees who earn more than Rs.15,000 will have to opt for the normal pension scheme.

The higher pension scheme is a relatively new scheme, and it is still being rolled out across India. Employees who are interested in the higher pension scheme should contact their employer or the Employees’ Provident Fund Organization (EPFO) for more information.

What is Early Pension under EPFO?

Eligibility, Calculation, and Formula:

The Employees’ Provident Fund Organization (EPFO) offers a pension scheme to its members called the Employees’ Pension Scheme (EPS). Under the EPS, members can opt for early pension from the age of 50 years, subject to certain conditions.

To be eligible for early pension under EPFO, a member must:

• Have completed at least 10 years of service in any establishment covered under the EPF Act.
• Have attained the age of 50 years but not the age of 58 years.
• Have a minimum balance of Rs. 100 in his/her EPF account.

The amount of early pension under EPFO is calculated using the following formula:

Pensionable salary * Pensionable service * 0.0833 / 70

Where:

• Pensionable salary is the average of the basic salary and dearness allowance of the last 36 months of service.
• Pensionable service is the number of years of service for which the employee has contributed to the EPS.
• 0.0833 is the rate of contribution to the EPS.
• 70 is the number of years considered for pension calculation.

The amount of early pension is reduced by 4% for every year that the pensioner is under the age of 58 years. For example, if a member opts for early pension at the age of 50, the pension amount will be reduced by 20% (4% * 5 years).

The early pension under EPFO is a valuable benefit for members who want to retire early. However, it is important to note that the pension amount will be reduced if the member opts for early pension. Members should carefully consider their financial needs and retirement goals before deciding whether to opt for early pension.

Here are some additional things to keep in mind about early pension under EPFO:

• The early pension amount is taxable.
• The early pension will not be paid if the member dies before the age of 58.
• The early pension can be withdrawn only after the member has retired.

If you are considering opting for early pension under EPFO, it is important to speak to a financial advisor to understand the implications and make an informed decision.