Higher Pension

What is Higher Pension?

Higher Pension refers to the enhanced pension benefit available to employees under the Employees’ Pension Scheme (EPS), 1995, who choose to contribute a higher portion of their salary toward the pension fund, instead of being capped at the statutory wage limit. This provision allows employees covered under the Employees’ Provident Fund (EPF) to receive pension benefits calculated on their actual salary (Basic + DA) rather than the capped limit (₹15,000 per month as per current rules).

Key Features:

• Eligibility: Applicable to employees who were EPF members before 1st September 2014, and who exercised the joint option with their employer to contribute higher pension on actual wages.
• Contribution: Both employee and employer contribute 8.33% of the actual salary toward EPS, instead of the capped ₹15,000 wage base.
• Calculation: Pension = (Pensionable Salary × Pensionable Service) ÷ 70. Under higher pension, the “Pensionable Salary” is based on full earnings.
• EPFO Circular (2023): Allowed eligible members to opt for higher pension through a formal application and verification process.
• Taxation: Pension received post-retirement is taxable as income under “Salaries.”

Example

If Meera earns ₹60,000 basic + DA and opts for higher pension, her EPS contribution is based on ₹60,000 (not ₹15,000). This significantly increases her monthly pension after retirement.

Why Higher Pension Matters?

It ensures financial security after retirement by aligning pension benefits with actual salary levels, helping employees maintain post-retirement income stability.