Cap on Retirement Savings

Print Edition: December 2013

The Employee Provident Fund Organisation (EPFO) has temporarily discontinued the option it gives for making higher contribution towards the Employee Pension Scheme (EPS) than the prescribed limit as 'the pension fund is running at an overall deficit', according to an EPFO note.

The contribution limit towards EPS (which is deducted from the EPF contribution) is 8.33% of an employee's monthly salary (basic plus dearness allowance), or Rs 541 (8.33% of Rs 6,500), whichever is lower.

Therefore, the maximum monthly contribution towards an employee's pension fund can be Rs 541. Any higher contribution requires the EPFO's permission. However, the EPFO noted that members making contribution based on higher salaries were getting disproportionate benefits under the scheme at the cost of members with lower salaries, which had to be corrected. Therefore, it said, "until further notice, no permission will be accorded for contribution on higher wages under EPS."

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