The government is currently evaluating a major proposal aimed at increasing pensions under the Employees’ Pension Scheme (EPS-95). The main change being evaluated is the shift from calculating the pension based on the capped salary system to the employee’s actual basic salary plus DA. This change could result in a huge difference in the monthly pension amounts for retirees who, due to higher salaries during their time of service, will be taken into account for the first time.
Pension Based on Actual Salary: What It Means
Initially, the EPS-95 structure allowed for the capping of pension calculations as a result of a fixed salary ceiling, which ultimately led to a very low pension for many employees. If the new proposal gets the green light, the EPFO will then calculate the pension using the real salary that employees were getting, thereby resulting in more precise and fair payouts. This will particularly benefit employees who have made contributions on a full salary basis rather than on the capped limit, hence they will finally receive pension which is commensurate with their actual contributions.
Who Will Benefit the Most
The new scheme is going to be a boon mainly for private-sector employees and those who have been contributing to the pension fund for a long time; their employers deposited pension contributions based on the actual salary. The pensioners who have exercised the option of getting the higher pension through the “joint option” will witness the maximum improvement. Many such pensioners, who at present receive very low monthly pensions, may soon see a huge hike in their monthly pensions once their documents are validated and recalculated using the actual salary data.
EPFO Verification Process Underway
EPFO has already commenced the verification of salary records, employer’s contributions, and joint-option forms submitted by employees aspiring for higher pension eligibility. The verification process is a must to confirm that only those who are entitled to receive pensions will get the revised benefits. After the completion of verification, EPFO will issue the orders for the revised pension, and the new higher pension amount will start showing in the monthly disbursements. Until then, the pensioners will keep getting the old amount.
Why This Reform Is Important
For several years, EPS-95 pensioners have been yelling for a just and sufficient pension that corresponds to their years of contribution and service. The majority of retirees now receive very low pensions which do not even cover basic living expenses, considering the ever-increasing prices. The use of actual salary to calculate pension is believed to eliminate the existing problems and henceforth, the retired persons can expect more equitable retirement income, thereby, becoming financially secure and stable.
What Pensioners Should Do Now
Pensioners are advised to frequently verify their EPFO accounts and check if their salary and contribution details are correct. Besides, it is very important to check whether the joint-option form (if applicable) has been filed correctly and received successfully. Keeping track of EPFO notifications and government announcements will be a great help for the pensioners to monitor the hike and obtain the benefits immediately after the approval.
Also Read: DA Increase December 2025: Full Breakdown Of Extra Salary And Pension Benefits
