Pro-rata provision was not intended for high PF pension, here is the proof

Kozhikode: The Employees’ Provident Fund Organisation (EPFO) allowed higher pensions without applying the pro-rata method of calculation till last year, though it claimed that there was no separate formula in the pension scheme to calculate higher pension apart from the pro-rata basis which is used for normal pension cases.

Pension payment orders (PPOs) of higher pensions are available on EPFO’s pensioners portal. Such higher pensions have been granted even after the Supreme Court gave its verdict in the pension case in February 2022. These pensions were continued to be paid at the same rate till March.

This is clear proof that the pro-rata provision was not at all intended for the higher pension scheme. This method of pension calculation was introduced for those individuals whose contribution to the pension fund was limited to the wage ceiling prescribed by EPFO, i.e., Rs 6,500 up to August 31, 2014, and Rs 15,000 thereafter.

So their pensionable salary would be calculated on a pro-rata basis separately for the period up to August 31, 2014, up to the wage ceiling of Rs 6,500 per month and for the subsequent period up to the wage ceiling of Rs 15,000 per month. Here the service period is split into two as per the two wage ceiling periods.

But, when the EPFO implemented the pro-rata basis, for those who had contributed to the pension fund based on their actual higher salaries during their entire service period, it sparked widespread opposition.

What the Supreme Court said
The pensioners questioned EPFO’s decision to alter the method of calculation of pensionable salary from the average of the past 12 months to the average of the past 60 months. (As there was no pro-rata provision for higher pension, this was not a point of contention in the case). However, the apex court clarified that it did not see any flaw in the scheme.

As far as the normal pension scheme is concerned, there are two different pensionable salary limits for two periods, ie before and after September 1, 2014. And, that was the logic behind the pro-rata basis of the calculation of a normal pension. But for higher pensioners, only one pensionable salary exists, which is an average of 60 months before exit. Therefore, it is pointed out that the pro-rata basis is illogical and a denial of justice to those who opt for the higher pension scheme.

Higher pension without pro-rate
Let us take as an example of the pension given to an employee who retired in May 2022 from Kerala Metals and Minerals Limited. Pensioner’s service including 2 years weightage is 10,415 days (28.534 years). Salary on Retirement – Rs 2,09,754; Last 60 months’ average salary – Rs 1,60,047

Pension without application of pro-rate provision Rs 65,240 (1,60,047 x 28.534 / 70).

Total pension would be Rs 65,893 including Rs 653 as past service benefit. The same amount has been paid till last month.