InvestorQ : What does the Supreme Court’s decision on pension mean for retirees?
nishi Shah made post

What does the Supreme Court’s decision on pension mean for retirees?

priya Shah answered.
3 years ago

The Supreme Court has dismissed the Special Leave Petition that was filed against a Kerala High Court Judgment setting aside Employee's Pension (Amendment) Scheme, 2014 that capped maximum pensionable salary to Rs. 15,000 per month.

What this essentially means is that the pension to all private sector employees is set to rise.

The High Court had asked the EPFO to give pension to all retiring employees on the basis of their full salaries, instead of capping the figure on which the pension amount is calculated at a maximum of Rs 15,000 per month.

Image courtesy: Times of India

This decision by the Supreme Court will have significant benefit retired people as their pension will get a tremendous boost.

The division bench comprising Justice Surendra Mohan and Justice AM Babu observed: The employees, who have been making contributions on the basis of their actual salaries after submitting a joint option with their employers as required by the Pension Scheme, are denied the benefits of their contributions by the said amendments without any justification. Apart from the above, to cap the salary at Rs. 15,000/- for quantifying pension is absolutely unrealistic. A monthly salary of Rs.15,000/- works out only to about Rs.500/- per day. It is common knowledge that even a manual labourer is paid more than the said amounts as daily wages. Therefore, to limit the maximum salary at Rs.15,000/- for pension would deprive most of the employees of a decent pension in their old age. Since the pension scheme is intended to provide succour to the retired employees, the said object would be defeated by capping the salary."

The bench further added: "If at all, a situation where the Fund base gets eroded occurs, the situation could be remedied at that time by enhancing the rates of contributions of persons contributing to the Fund through a legislative exercise. The attempt to maintain the stability of the fund by reducing the pension would only be counter-productive and would defeat the very purpose of the enactment.”