The Employees’ Provident Fund Organization (EPFO) had been distributing higher pensions to government employees except on a proportionate basis till last year.
EPFO claimed that due to lack of any formula to calculate the higher pension, it had applied the proportionate basis. Pension Payment Order (PPO) details are available on EPFO website.
In this regard, higher pension was being distributed even after the order of the Supreme Court on November 4, 2022. This points to the fact that pro rata ratio was not the basis of higher provident fund pension schemes.
The proportionate ratio applies only to people falling under a specific salary bracket (maximum Rs 6,500/15,000) who contributed to the pension fund. To provide them pension, their service period was divided into two parts on proportionate basis.
Employees who had contributed up to a maximum of Rs 6,500 up to August 31, 2014 and subsequently up to a maximum of Rs 15,000, were given pension based on their pay limit during the respective period.
However, there was widespread protest after EPFO implemented the proportionate basis for those who had contributed to the pension fund based on their total salary during their entire service period.
Supreme Court’s comment
The case was not sub judice because the proportionality criterion did not apply to higher pensions. Pensioners questioned the change of considering the average of the last 60 months instead of the last 12 months to decide their pension. However, the Supreme Court found no fault in this change.
The proportionate pension scheme was based on two pensionable salary ranges, i.e. before and after 1 September 2014. However, a pensionable limit only applies when considering the average of the last 60 months. It has been pointed out that the proportional basis for deciding pension was illogical and illegal.
Higher pension without proportionality
Consider the case of an employee who retired from Kerala Metals and Minerals Limited in May 2022. The pensioner’s service, including two years’ weightage, was 10,415 days (28.534 years).
His last salary was Rs 2,09,754 and the average salary of last 60 months was Rs 1,60,047. His pension excluding proportionate basis was calculated at Rs 65,240 (1,60,047 x 28.534/70). His pension will be Rs 65,893, which also includes past service benefit of Rs 653. He has received this amount till last month.