Arbitrary and opaque: On the Employees’ Pension Scheme 2026

What Happened

The EPFO's Central Board of Trustees (CBT) approved the Employees' Pension Scheme (EPS) 2026 on March 2, 2026, replacing the EPS 1995 scheme.
The new scheme was notified without wide stakeholder consultations, raising transparency concerns given it affects approximately 5.4 crore contributing members and 82 lakh pensioners.
The EPS 2026 has been designed as a corollary to the Code on Social Security, 2020, which was abruptly notified in November 2025 along with three other labour codes — but neither the government nor the Labour Ministry had previously signalled the scheme's overhaul.
Key concerns include: removal of the "higher pension option" provision (deemed "obsolete"), no upward revision of the ₹15,000 monthly wage ceiling for PF contribution, and no increase in the ₹1,000 minimum monthly pension fixed over 11 years ago.

Static Topic Bridges

Employees' Provident Fund Organisation (EPFO)

The EPFO is India's statutory social security body under the Ministry of Labour and Employment, administering three schemes: the Employees' Provident Fund (EPF), the Employees' Pension Scheme (EPS), and the Employees' Deposit Linked Insurance Scheme (EDLI). It is one of the world's largest social security organisations, covering establishments with 20 or more employees across most sectors.

Established under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952
Governed by the Central Board of Trustees (CBT) — a tripartite body with government, employer, and employee representatives
EPF contribution: 12% of basic wages by employee; 12% by employer (of which 8.33% goes to EPS, rest to EPF)
EPS 1995 provided defined-benefit pension to employees who had completed 10 years of service
Monthly pensionable salary cap: ₹15,000 (set in 2014; not revised since)
Minimum monthly pension: ₹1,000 (set in 2014)
Current active members: ~5.4 crore (54 million); current pensioners: ~82 lakh (8.2 million)
EPFO manages a corpus of over ₹20 lakh crore

Connection to this news: The EPS 2026 replaces the scheme that has governed pension rights for over 54 million workers. The manner of its approval — by the CBT without prior public consultation or legislative debate — underscores the governance gap in India's labour welfare administration.

The Government of India consolidated 29 central labour laws into 4 Labour Codes: Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020). The Code on Social Security subsumes nine previous laws, including the EPF Act, ESI Act, Maternity Benefit Act, and Gratuity Act.

4 Labour Codes passed by Parliament in 2019–20, but implementation delayed for years pending state governments framing rules
Code on Social Security, 2020: notified November 2025 after prolonged delay
The codes extend formal social security protections to gig workers and platform workers (a significant expansion)
Critics argue the codes dilute collective bargaining rights and make it easier for employers to reduce social security obligations
State rules must be notified for central codes to take effect in those states — uneven implementation remains a challenge
Tripartite consultation (government + employers + trade unions) is a founding principle of labour law-making but was reportedly bypassed for EPS 2026

Connection to this news: The EPS 2026 being designed as a corollary to the Code on Social Security means its legal framework is part of the broader labour code architecture — but the absence of consultation before its adoption is inconsistent with the tripartite spirit that should govern EPFO's Central Board.

EPS 1995 Litigation: Higher Pension Controversy

The EPS 1995 allowed employees earning above the wage ceiling to opt for pension on actual salary (not capped). A 2014 amendment limited this option to those who had exercised it within one year of September 1, 2014. The Supreme Court in 2022 (RC Gupta case follow-up) held that post-2014 employees who had contributed to EPF on higher salary should be allowed to contribute proportionally to EPS and claim higher pension. However, pre-2014 retirees were largely excluded, creating a two-tier system.

EPS 1995 originally: pensionable salary = average of last 12 months' salary (no cap for those who opted)
Post-2014 amendment: pensionable salary = average of last 60 months' salary; capped at ₹15,000 unless opted otherwise
Supreme Court, 2022: directed EPFO to allow joint options for higher pension for eligible post-2014 employees
EPFO set conditions for exercising the option that many employees found burdensome or impossible to meet
EPS 2026: removes the "higher pension option" provision entirely, calling it "obsolete"
Pre-2014 retirees: largely left without remedy even after years of litigation

Connection to this news: By removing the higher pension option in EPS 2026, the government effectively ends a decade-long legal battle in the government's favour, denying millions of workers the right to pension benefits proportionate to their actual contributions.

Article 41 of the Indian Constitution (DPSP) directs the state to make effective provision for securing the right to work, to education, and to public assistance in cases of unemployment, old age, sickness, and disablement. While DPSPs are not justiciable, they form the constitutional foundation for social security legislation.

Article 41: State obligation to provide public assistance in cases of old age, sickness, disablement — subject to limits of economic capacity
Article 42: State to make provision for just and humane conditions of work and maternity relief
Article 43: State to endeavour to secure living wage and decent standard of life for workers
Pension adequacy is a direct implementation challenge under these DPSPs
India does not have a universal pension system; formal sector pensions (EPF/EPS, NPS) cover only ~12–15% of the workforce; the rest depend on informal savings or family support

Connection to this news: The failure to revise the ₹15,000 wage ceiling or the ₹1,000 minimum pension — both over 11 years old — means the real value of pension benefits has been eroded by inflation, calling into question the state's commitment to the spirit of Article 41.

Key Facts & Data

EPS 2026 approved by EPFO's CBT: March 2, 2026
Replaces: EPS 1995 (30-year-old scheme)
Affected members: ~5.4 crore contributing; ~82 lakh pensioners
EPF wage ceiling: ₹15,000/month (unchanged since 2014)
Minimum pension: ₹1,000/month (unchanged since 2014)
Employer's EPS contribution: 8.33% of basic wages (out of 12% total employer contribution)
EPFO corpus: over ₹20 lakh crore
Code on Social Security 2020: notified November 2025, after ~5 years' delay
Supreme Court higher pension ruling: 2022 (RC Gupta case)

​Arbitrary and opaque: On the Employees’ Pension Scheme 2026