18 Feb, 2024 12:53 PM

Supreme Court Ruling Ignored? PF Pension Calculations Under Fire

Supreme Court Ruling Ignored? PF Pension Calculations Under Fire

Many individuals expecting increased PF pensions based on their full salaries (as per the Supreme Court ruling) face disappointment. The proposed calculation method, which considers pre- and post-September 2014 service periods separately, significantly reduces potential pension amounts for many.

A recent circular issued by PF offices outlines the pension calculation method following the Supreme Court verdict, including illustrative examples. However, the existing pension formula remains unchanged, leading to concerns.

Understanding the formula and its limitations:

The pension formula multiplies the pensionable salary by the pensionable service and then divides the result by 70. While the formula itself remains unaltered, the proposed distinction between pre- and post-September 2014 salary/service periods significantly impacts the overall pension amount. This distinction is likely to have a greater impact on those who retired after September 2014.

Calculating pensionable salary:

The pensionable salary is typically calculated as the average of an employee's total salary in the last 60 months of service. However, the current decision mandates separate calculations for the pre- and post-September 2014 periods. This approach lowers the overall pensionable salary since most employees experience salary increases towards the end of their careers.

Weightage concerns:

An additional two years of service are included for individuals who served beyond 20 years. However, this additional weightage applies only to the pre-2014 period, further reducing the overall pension amount.

Previous conflicting information:

It's worth noting that EPF issued FAQs in June and December 2023, explicitly stating that the average of the total salary drawn in the last 60 months would be used for calculating pensionable salaries. This recent decision contradicts both the Supreme Court verdict and the previously communicated information, raising concerns about its legality.

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