Kochi: In a significant ruling, the Kerala High Court has directed that the higher Provident Fund (PF) pension currently being received by pensioners should not be reduced based on the pro rata condition.

The interim order, issued by Justice Murali Purushothaman, came while considering a petition filed by N Balakrishna Pillai, a native of Thiruvananthapuram, along with 40 other pensioners. The petition challenged the pro rata order issued by the Employees’ Provident Fund Organisation (EPFO) on February 14, 2024 and the subsequent explanatory order on January 18, 2025. With this ruling, the court has temporarily prevented the EPFO from reducing the petitioners' pension under the pro rata method for two months. The case is scheduled for further hearing in the last week of March.

Under the pro rata method, the EPFO divides a pensioner’s service period into two segments--before and after September 1, 2014 - and calculates pension separately for each period. The Kerala High Court’s intervention comes in response to the first batch of cases filed after the PF authority issued its latest clarification order.

The petitioners, all retired employees of Travancore Titanium in Thiruvananthapuram, had been receiving higher pensions in proportion to their salaries. However, they approached the court after receiving notices indicating a reduction in their pension amount due to the Pro Rata calculation method. Advocate PN Mohanan appeared for the petitioners.

The Pro Rata method for calculating pensions has been in effect since September 1, 2014, bringing a significant change to the way pension amounts are determined. Under the traditional method, pension is calculated based on an individual’s entire service period.

However, the pro rata system divides the service period into two segments. For service up to August 2014, pension is calculated based on the current salary at that time and for service after September 2014, pension is computed separately. This division effectively reduces the final pension amount by 25% to 35%, as the continuity of service period is broken.

Petitioners’ arguments
Not applicable to higher pension contributions: The pro rata method cannot be imposed on individuals who have contributed towards a higher pension, which is calculated in proportion to their actual salary.

Only relevant for statutory pension cases: The pro rata system applies only to cases of statutory pension, where the salary limit for pension calculation was fixed at Rs 6,500 or Rs 15,000.

No legal basis: Clause 11(4) of the Employees’ Pension Scheme does not impose any conditions that justify applying pro rata to higher pension calculations. Splitting the service period into pre- and post-September 1, 2014, for pension computation lacks legal backing and is therefore invalid. The correct basis for pension calculation should be the average salary during the final period of service.

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