The last date for applying for higher pension to EPS members is June 26, 2023. But, the EPS members were confused about the calculation of higher pension. Now EPFO has cleared the situation regarding higher pension calculation method.
EPFO has issued a circular saying that higher pension will be calculated for employees opting for higher pension on the basis of actual salary under EPS. According to the circular, the formula for higher pension calculation will be different for those who retire before September 1, 2014 and those who retire after this date.
Pension calculation for those retiring before 1st September 2014
As per EPFO If an eligible applicant’s pension (EPS) started before 1st September 2014 then higher pension will be calculated during the contribution period during 12 months preceding the date of retirement Will be based on the average monthly salary received.
Pension calculation for those retiring on or after 1st September, 2014
For those retiring on or after 1st September, 2014 higher considering the average pay drawn during the contribution period of service in the period of 60 months preceding the date of retirement EPS pension will be calculated.
Why is 1st September 2014 important?
It is important to note that the government had revised the pension calculation formula in September 2014. The average salary during the 12 months preceding the date of retirement up to 31st August 2014 was taken into account. However, from September 1, 2014, the government revised it to 60 months. As a result of this change, the pension of those who retired on or after this date was reduced.
Average salary is the basic salary of an employee. However, for those opting for higher EPS pension, the pay used for calculation of higher pension will be full actual pay (including allowances etc.) instead of just basic pay.
Understand pension calculation with example
- Assume you have joined the EPS scheme in October 2008 and your retirement is in September 2033. Here the service period is 25 years (September 2033-October 2008). The average salary for the purpose of pension calculation will be calculated on the basis of your average salary for the last 5 years (60 months).
- If you had retired on or before 31st August 2014, then the average salary for higher EPS pension will be calculated on the average salary of the last year of service.
