FinMin rejects proposal to double minimum pension amount under EPS

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The Union finance ministry has rejected a proposal sent by the labour ministry to increase the monthly minimum pension amount under the Employee Pension Scheme (EPS) to Rs 2,000 from Rs 1,000 at present.

The central board of trustees (CBT) – the apex decision-making body of the Employee Provident Fund Organisation (EPFO) – was apprised of the rejection of the proposal in its latest meeting on Saturday.

“As per recommendations made by a high empowered monitoring committee constituted by the government, a proposal to increase the minimum pension under EPS from Rs 1,000 to Rs 2,000 per month by providing additional budgetary support, was sent to the Ministry of Finance. The ministry did not agree to it,” sources close to the development said.

The data sourced from the social security organisation’s annual report for FY23 show that of the total 7.55 million pensioners under the scheme, 3.64 million pensioners received a monthly pension of up to Rs 1,000, followed by 1.17 million pensioners who received a monthly pension between Rs 1,001 and Rs 1,500, while 868,000 pensioners received a monthly pension of Rs 1,501 to Rs 2,000. Only 26,769 pensioners received a monthly pension of above Rs 5,000 per month.

“In meetings, it has been our demand to raise the minimum pension amount. The pension corpus is valued annually and additional reliefs are paid if the position of the fund so permits. Since the year 2000, the fund had run into a deficit in most of the valuations done and no additional reliefs could be paid. However, the central government did enhance the minimum pension to Rs 1,000 by providing budgetary support in 2014. Keeping in view the widespread demand, the minimum pension should be raised further,” a CBT member who attended the meeting said on condition of anonymity.

The EPS, 1995 is a self-funded scheme with contributions equivalent to 8.33 per cent of the monthly wages from the monthly employer’s share of provident fund contributions as well as a contribution of 1.16 per cent of the monthly wages (limited to the amount payable on pay of Rs 15,000 only) by the central government.

In March 2022, the parliamentary standing committee on labour had asked the labour ministry to pursue the matter with the Ministry of Finance to obtain adequate budgetary support, as the Rs 1,000 monthly pension is ‘grossly inadequate’.

Earlier on Saturday, the CBT held its 235th meeting and among other things recommended a three-year high-interest rate of 8.25 per cent for FY 2023-24 for its over 290 million total subscribers, out of which around 68 million are active contributing subscribers. With this payout, the EPFO is expected to retain a surplus of Rs 278 crore in FY23 as the board recommended a distribution of Rs 1.07 trillion to EPF members’ accounts on a total principal amount of about Rs 13 trillion in 2023-24.

Source: EPFO Annual Report 2022-23

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Pooja Gupta

CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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