Kerala High Court sets aside PF pension changes

Changes in scheme had reduced benefits to employees.

Updated - October 12, 2018 10:49 pm IST

Published - October 12, 2018 05:55 pm IST - Kochi

A Division Bench of the Kerala High Court on October 12 set aside the Employees’ Pension (Amendment) Scheme which reduces drastically the pension payable to employees. File

A Division Bench of the Kerala High Court on October 12 set aside the Employees’ Pension (Amendment) Scheme which reduces drastically the pension payable to employees. File

A Division Bench of the Kerala High Court on Friday set aside the Employees Pension (Amendment) Scheme (GSR609(E)) effecting various changes that have drastically reduced pension eligibility of employees.

The Bench comprising Justices K. Surendra Mohan and A.M. Babu passed the verdict, while allowing a batch of 507 writ petitions filed by various organisations and employees challenging the amendment.

The petitioners pointed out that the amendment order issued on August 22, 2014, limited the maximum pensionable salary to ₹15,000 per month. They contended that it was against the spirit of the scheme.

The amendment omitted an earlier provision allowing employees to be paid pension on the basis of the actual salary drawn by them if they had contributed on the basis of actual salary drawn by them on a request jointly made by employees and the employer.

As a result of the amendment, pension of the employees is calculated taking an average of 60 months pay, instead of 12 months. The petitioners pointed out that the amendment classified employees into two categories; as retiring prior and after September1, 2014.

Besides, the requirement of additional contribution at 1.6% in the case of existing employees was against the very purpose of the Act. The amendment also omitted an earlier provision permitting exercise of joint option by the employer and employees to contribute to the pension on salary exceeding ₹6,500 per month from the date of commencement of the scheme.


It also stipulated that fresh option should be exercised within 6 months from the first day of September 2014.

The court also set aside the orders of the Employees Provident Fund Organization declining to grant opportunities to the petitioners to exercise a joint option to remit contributions to the Employees Pension Scheme on the basis of actual salaries drawn by them.

The court also ordered that employees shall be entitled to exercise the option stipulated by the scheme without being restricted in doing so by the insistence on the date.

The employees who have been making contributions on the basis of their actual salaries after submitting joint option were denied the benefits of their contributions without any justification.

Besides, to cap the salary at ₹15,000 for quantifying pension was absolutely unrealistic. A monthly salary of ₹15,000 then worked out only to about ₹500. Even a manual labourer was paid more than the this amount as daily wage. Therefore, the amendment limiting the maximum salary to ₹15,000 for pensions would deprive most of the employees a decent pension in their old age.

Since the pension scheme was intended to provide succour to the retired employees, this objective would be defeated by capping the salary. The court also added that the Provident Fund authority had no right to deny pension legitimately due to the employees on the ground that the fund would get depleted.

It also observed that the stipulation that average monthly pay drawn over a span of 60 months preceding the date of exit as the pensionable service deprived the employees of a substantial portion of their pension. The judges noted that “no scheme that defeats the purpose of enactment by reducing the pension payable to the employees in their old age to a ridiculously low amount, which is not sufficient even for ensuring a decent life to them cannot be sustained.”

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