Higher EPFO pension: Who is eligible, who benefits, and what are the rules now?

Some media reports last month claimed that the Department of Expenditure has reportedly approved hiking the Employees’ Provident Fund (EPF) wage ceiling from Rs 15,000 to Rs 25,000. 

However, EPFO CEO Ramesh Krishnamurthi has stated that there is no proposal to reopen the option for pension on higher wages. This implies that the basic EPF wage ceiling remains at Rs 15,000, and the mandatory 12% contribution guidelines apply. 

The higher-pension option is an important issue after the Supreme Court’s November 2022 decision, which permitted eligible employees to choose pension contributions based on higher income, subject to certain conditions.

Here is what the higher EPFO pension rules mean, who could benefit, who may not, and the key factors members should consider. 

What are the current EPS pension rules?

The Employees’ Pension Scheme, 2026 (EPS-2026) is now the operative pension framework under the Code on Social Security, 2020. 

It was notified on 29 June 2026 and superseded the Employees’ Family Pension Scheme, 1971 and Employees’ Pension Scheme, 1995, while preserving matters already done or omitted under the earlier schemes.

The Ministry of Labour and Employment notified a wage ceiling of Rs 15,000 per month on 29 May 2026 under clause (89) of section 2 of the Code on Social Security, 2020, for the purposes of Chapter III of the Code.

The minimum monthly pension under the Pension Scheme (EPS-95 / EPS 2026) remains at Rs 1,000. Labour unions and pensioner groups have pushed for a Rs 7,500 minimum monthly pension. However, in response to a question asked by MP Ramvir Singh Bidhuri on 10th August 2026, Shobha Karandlaje, the Minister of State for Labour and Employment, clarified in the Rajya Sabha that there is no immediate plan or official approval to increase the minimum pension. 

A member generally requires at least 10 years of eligible pensionable service to qualify for a monthly pension. Normal pension is payable from age 58. Early pension can be taken from age 50, subject to the scheme’s conditions and the prescribed reduction for early commencement.

“The standard employer contribution to the Pension Fund remains 8.33% of wages up to the notified wage ceiling. For eligible members who had exercised the higher-pension joint option under the erstwhile EPS-1995, the scheme provides for the enhanced 9.49% contribution on wages exceeding Rs 15,000,” said Rishi Agrawal, Ceo and Co-founder of Teamlease Regtech. 

Members who do not meet the qualifying-service requirement for a monthly pension may, depending on the applicable provisions and circumstances, be entitled to a withdrawal benefit or a scheme certificate.

What is the current status of higher EPS pension?

Currently, there is no option to opt for higher pension for any employee who is willing to go for higher pension. 

The government issued notifications in May 2023 to implement the Supreme Court’s November 2022 judgment on pension on higher wages under the Employees’ Pension Scheme (EPS), 1995. The ruling gave certain eligible EPFO members and pensioners another opportunity to opt for pension based on higher wages. 

The Supreme Court had said that employees who were in service before September 1, 2014 and continued to work on or after that date, but could not exercise the joint option because of the earlier cut-off date, should be given another opportunity to do so. EPFO subsequently opened an online facility for submitting the joint option.

The members who have opted for higher pension and have submitted the joint declarations and remittances towards higher pension within the window continue to enjoy the benefits of higher pension. It is not an open-ended option, and it is a closed one. It is available only for those members who were eligible and opted for it following the SC ruling.  

A similar opportunity was provided to certain employees who had retired before September 1, 2014 and had already exercised the required joint option before retirement, but whose applications had been rejected by EPFO because of the cut-off date.

One important issue was the requirement for an additional 1.16% contribution on salary above Rs 15,000 per month. The Supreme Court had held this requirement to be invalid and directed the authorities to make the necessary changes.

The government decided that this additional 1.16% contribution would not be taken from the employee’s contribution. Instead, it would be adjusted from the employer’s existing 12% contribution towards the provident fund.

Eligible members were required to submit a joint option with their employer to be considered for pension on higher wages. The deadline was extended several times to July 11, 2023, with 17.49 lakh applications received by then.

For members who had exercised the qualifying joint option under the erstwhile EPS-1995 and are found eligible, the employer contribution towards pension is enhanced from 8.33% to 9.49% on wages exceeding the notified Rs 15,000 ceiling. 

“The additional 1.16% is borne through the employer contribution. The Central Government contribution of 1.16% remains subject to the notified wage ceiling,” commented Agrawal. 

How is the final EPS pension calculated?

The core pension formula is: Monthly pension = Pensionable wages × Pensionable service ÷ 70.

Under the existing architecture, pensionable wage is generally based on the average monthly wages over the 60 months immediately preceding exit, subject to the applicable wage ceiling and the rules governing the relevant service periods.

Pensionable service is a second major determinant of the final amount. Longer eligible service produces a higher pension under the formula. The scheme also contains service-weightage provisions for qualifying members.

For higher-pension cases, the pensionable wage can be based on eligible higher or actual wages rather than being confined to the ordinary ceiling, but only for members and periods covered by the higher-pension provisions and subject to EPFO verification. The final calculation is not simply a matter of substituting an employee’s current salary for Rs 15,000.

Does choosing a higher EPS pension actually leave an employee better off?

Not necessarily. The decision is fundamentally a trade-off between a larger defined monthly pension and a smaller EPF corpus.

“Where a higher pension is accepted, the prescribed differential contribution is adjusted or transferred from the member’s EPF accumulation into the Pension Fund, together with the applicable interest calculation. The member therefore gives up part of the lump-sum EPF corpus in exchange for a higher lifetime pension,” according to Agrawal. 

The relevant financial question is not simply whether the monthly pension rises. It is whether the incremental lifetime pension justifies the reduction in the EPF corpus, including the loss of liquidity and the investment or interest opportunity associated with that amount.

“Subscribers should consider age, expected retirement period, size of the EPF amount that would be transferred, expected EPF returns, need for a retirement lump sum, other retirement assets and income, family-pension implications, and individual cash-flow requirements. There is no universally optimal choice for every subscriber,” said Agrawal. 

What happens to other EPFO benefits when a member opts for a higher pension?

The higher-pension option principally affects the allocation of the relevant retirement contribution between EPF and EPS. It does not mean that a member ceases to be covered by EPFO or automatically loses the other statutory social-security benefits.

The principal effect on EPF is that the amount required to support the higher EPS pension is adjusted or transferred from the provident-fund accumulation under the applicable higher-pension procedure. Consequently, the eventual EPF lump-sum corpus can be lower than it would otherwise have been.

EPF withdrawals continue to be governed by the applicable EPF framework, but amounts transferred into EPS are no longer part of the withdrawable EPF corpus.

The Employees’ Deposit-Linked Insurance Scheme, 2026 (EDLI-2026) is a separate deposit-linked insurance framework under the Social Security Code. Opting for a higher EPS pension does not, by itself, remove EDLI coverage.

EPS itself provides pensionary benefits in specified circumstances, including superannuation pension, early pension, permanent and total disability pension and family-related pension benefits. A higher pension can therefore have implications for survivor or family pension as well as the member’s own retirement income, subject to the detailed scheme provisions.

What is the latest policy position on the EPS pension limit and EPS-2026?

The general EPF coverage wage ceiling is Rs 15,000 per month as notified on 29th May, 2026 in Chapter 3 of the Social Security Code. The Government stated that revision of the ceiling is undertaken from time to time after stakeholder consultation because it affects employee take-home pay and employer hiring costs.

This must be distinguished from higher EPS pension. The higher-pension route is a specific mechanism for eligible members and does not amount to a general increase of the statutory EPF/EPS coverage ceiling for all employees.

The Supreme Court’s 4 November 2022 decision in EPFO v. Sunil Kumar B. & Ors. is the principal judicial development behind the higher-pension implementation process. EPFO subsequently issued implementation directions and processed joint-option or validation applications.

The major 2026 development is that EPS-2026 is no longer merely a proposal. The Central Government notified the Employees’ Pension Scheme, 2026 on 29 June 2026 under section 15(1)(b) of the Code on Social Security, 2020. 

The notification superseded the Employees’ Family Pension Scheme, 1971 and Employees’ Pension Scheme, 1995, except in respect of things already done or omitted before supersession.

EPS-2026 provides continuity for existing rights and benefits rather than simply extinguishing earlier pension entitlements. The notified framework carries forward the pension architecture and recognises benefits arising under the earlier schemes.

The core pension formula and the 60-month pensionable-wages averaging approach continue to be central features. The standard employer contribution to the Pension Fund remains 8.33% of wages up to the notified wage ceiling. 

For eligible members who had exercised the higher-pension joint option under the erstwhile EPS-1995, the scheme provides for an enhanced 9.49% employer contribution on wages exceeding Rs 15,000.

Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions. 

Every financial journey has a turning point. What’s yours?

Financial Express is launching a new series highlighting real experiences with money, investments, and the taxman. Did a sudden tax rule catch you off guard? Did a piece of financial advice change your life? Your story could provide invaluable, practical lessons for thousands of fellow taxpayers. Share your experience with us. We respect your privacy: no stories will be featured without a direct conversation and your full consent. Thank you.