Higher PF pension: Centre takes U-turn, justifies EPFO’s controversial pro-rata method

New Delhi: The Union government has once again revised its stance on using the pro-rata method for calculating higher PF pensions. The Centre has now justified in Parliament the pro-rata system, which had resulted in a huge reduction in pension amounts. The government claimed that the Supreme Court has not found the pro-rata method illegal. However, the government’s reply in Parliament overlooked the fact that the Supreme Court has never examined whether the pro-rata method is correct in matters relating to higher pension. Earlier, the Employees’ Provident Fund Organisation (EPFO) had also clarified a similar position.

Correction to Labour Ministry’s own directive

On May 31, 2023, the Labour Ministry sent a letter to the EPFO instructing that pensions must be calculated on the basis of the last 60 months’ salary before retirement. But the EPFO ignored this and proceeded with the pro-rata method— a stance that the Centre has now endorsed, as revealed in the government’s reply to Parliament. This makes it clear that even if the pro-rata issue reaches the Supreme Court again, the Centre is likely to stick to this position.

Justification supported by citing the Supreme Court

Responding in the Lok Sabha to Kerala MP N K Premachandran’s question on whether the government intended to withdraw the pro-rata method, Minister of State for Labour Shobha Karandlaje justified the method by citing the Supreme Court. She stated that the pro-rata method specified in Paragraph 12 of the Employees’ Pension Scheme (EPS) ensures equal treatment of all categories of pensioners. According to her, it treats those within and outside the maximum pensionable salary limit in the same manner. However, N K Premachandran criticised the Centre’s stance as misleading and disappointing.

Minimum pension will not be increased

The government’s reply also made it clear that there is no intention to increase the minimum pension for PF members from the current ₹1,000. Responding to a question on this, the government repeated its position that even the ₹1,000 pension is paid only with budgetary support.

17.49 lakh applicants; only 1.24 lakh started receiving higher pension

Although 17.49 lakh people nationwide applied for pension based on actual salary as per the Supreme Court verdict, the EPFO issued demand letters seeking additional contributions to only 4.27 lakh applicants. Out of these, 2.33 lakh people deposited the required amount. So far, only 1.24 lakh of them have begun receiving the higher pension, the government informed Parliament.