[Answered] What are the implications of the Supreme Court’s ruling on the EPFO pension scheme?

Introduction: Contextual introduction.
Body: Explain implications of the recent Supreme Court ruling on Provident Fund (PF) pensions.

Conclusion: Write a way forward.

The Employee Pension Scheme (EPS), which is administered by the Employees’ Provident Fund Organisation (EPFO), aims to provide employees with pension after the age of 58. The Supreme Court directed that members of the scheme who did not exercise the option for higher pension as provided for in the scheme as it existed before the 2014 amendment, were entitled to exercise the option, jointly with their employers, even under the amended scheme.


  • The serving employees can opt for higher pension now, transferring the stipulated part of the employer’s contribution to the pension fund.
  • More members and employers now have four months to opt for a pension scheme linked to actual salaries. Only a negligible percentage of EPFO members – with salaries higher than the Rs 15,000 a month pensionable salary cap – had earlier opted for contributions based on their actual salaries.
  • This would essentially imply higher annuity after retirement. Experts said that in times of higher inflation this would provide a better social security cover for workers after retirement.
  • The existing members had to contribute the additional 1.16 per cent if they opted for pension linked to actual salaries. Otherwise, as per the Scheme, the government pays this 1.16 per cent of the pay of the members. So, the EPFO will have to find ways to fund this additional contribution.
  • The government may have to rework the contribution distribution between provident fund and pension.

The pension scheme needs to be reformulated in a way that it provides benefits to employees without putting an onerous burden on the employers. The government contributes only 1.16% of employees’ monthly salary.

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