New Delhi: The Centre has approved a new Employees’ Pension Scheme, triggering concern among subscribers who had opted for higher pension that the revised framework may adversely affect their entitlements.

The new scheme, set to replace the 1952 Employees’ Provident Fund (EPF) Scheme and the 1995 Employees’ Pension Scheme (EPS) from April 1, 2026, have raised questions over whether those who exercised the option for higher pension will be negatively impacted. The Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) recently approved EPS 2026, which removes the provision allowing members to opt for higher pension. When read alongside the clarification that pension will be calculated as per the scheme in force at the time of retirement, this has intensified concerns.

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Will higher pension be denied?

The key concern is whether the EPFO may invoke provisions in the new scheme to deny higher pension to EPF members who were in service as on September 1, 2014, and who retire after April 1, 2026, despite the Supreme Court having upheld their right to opt for higher pension.

The new scheme omits Paragraph 11(4) of EPS 1995, which allowed members to contribute on higher wages for enhanced pension. Although the option window has now been closed, uncertainty remains over whether those who had already applied could be denied higher pension.

Will Pro Rata calculation reduce pension?

Even if higher pension is not denied outright, the new scheme allows for the application of the pro rata method, which could substantially reduce pension amounts. Under this method, pensionable wages will be calculated for different periods in accordance with the wage ceiling applicable during each period. The specific wage ceiling will be notified by the Centre.

As a result, those retiring after April 1, 2026, are likely to have their pension calculated on a pro rata basis. Instead of being determined solely on the average salary drawn during the last 60 months of service, the pension would be subject to the notified wage ceilings for the respective periods. While the pro rata principle existed under the earlier scheme as well, it did not apply to those contributing on higher wages for enhanced pension, according to applicants’ arguments. The EPFO may contend otherwise. Several cases challenging pro rata reductions are pending before various courts. The new scheme, however, incorporates provisions granting statutory backing to the pro rata method.

Under Paragraph 11(3) of the earlier scheme, the wage ceiling for contribution to the pension fund is currently ₹15,000. The new scheme retains the minimum pension under EPS at ₹1,000 per month. Although there is no bar on the government increasing the minimum pension at any time, it is noteworthy that the amount remains unchanged despite the formulation of the new scheme.