EPFO may change the formula related to higher pension in future
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Its current formula under EPS 95 is as follows: Monthly Pension = (Pensionable Service*Pensionable Salary)/70. It is clear that the higher the pensionable service and pensionable salary of the member, the higher will be his pension. The pensionable service period will remain the same in each scenario but the pensionable salary can be changed. If EPFO makes any changes in this and this may reduce the pensionable salary, then the member will get less pension. Prior to September 1, 2014, the pensionable salary was calculated on the basis of the average salary of the last 12 months. But later it was changed.
Can EPFO change the formula
Pooja Ramchandani, partner, Shardul Amarchand Mangaldas & Co, says the method of calculating pensionable salary was changed in September 2014. According to this, the pensionable salary will be calculated on the basis of the average salary of the last 60 months before leaving the job. This is the formula for members applying for higher pension. EPFO has resolved most of the questions regarding higher pension through a circular. But this screw is still stuck as to how the pension will be calculated. EPFO says that another circular will be issued in this regard. Only after that the situation will be clear.
As people’s career progresses, their salary also increases. That is, if the average salary of someone’s last year is considered as pensionable salary, then he will get more money. If the period for drawing average salary is extended, then he will get less pension. In the current formula, the pensionable salary is calculated on the basis of the average salary of the last 60 months. Members feel that if they apply for higher pension, they will continue to get pension on the basis of this formula. If there is a change in this formula in future, the members will be at loss.
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option to go to court
The question is whether EPFO can change the pension formula with retrospective effect in future. Sonam Chandwani, Managing Partner, KS Legal & Associates, said that according to Section 7 of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, a rule can be changed retrospectively. Some experts believe that the government will have to make a law for this. Ramchandani said that any change in the EPS scheme can be done only by amending the law. The last time the formula was changed, it was challenged in court. But the court upheld the change. If something like this happens this time too, the members will have a way to go to court.
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