EPFO: Minimum monthly pension of Rs 1,000 to be a reality this month
Ahead of Lok Sabha polls, the government is likely to approve this month a proposal that will entitle formal sector workers a minimum monthly pension of Rs 1,000, immediately benefiting 27 lakh pensioners.
Those who get less than Rs 1,000 a month include 22 lakh member pensioners and 5 lakh widows as on March 31, 2013. There are about 44 lakh pensioners.
“The Labour Ministry’s revised proposal for minimum pension of Rs 1,000 per month was submitted to the Finance Ministry last week, and is likely to be approved this month,” said an official source.
The ministry’s proposal to assure minimum pension of Rs 1,000 under the Employees’ Pension Scheme 1995 (EPS-95), run by the Employees’ Provident Fund Organisation (EPFO), is pending for a long time.
Earlier, the ministry had proposed that the government should increase its subsidy on the scheme from 1.16 percent of the basic wages to 1.79 percent to assure the minimum pension amount of Rs 1,000 per month.
However, it did not find favour with the Finance Ministry as this would have resulted in permanent increase in subsidy provided by government.
The Labour Ministry in its revised proposal has asked the Finance Ministry to provide for around Rs 1,300 crore additional amount every year for the purpose, and indicated that this amount can reduce over a period of time with more members subscribing to the EPS-95.
Besides, the government is in the process of raising the basic wages ceiling under the Employees Provident Fund Scheme to Rs 15,000 from existing Rs 6,500.
All those employees getting basic wages – including basic pay and dearness allowance – of more than Rs 6,500 per month, are not covered under the social security schemes run by EPFO.
The Finance Ministry did not agree with the hike in pension subsidy to 1.79 percent of basic wages as the proposed increase in wage ceiling would have resulted in perpetual burden on the exchequer.
EPFO has a corpus of around Rs 5 lakh crore including around Rs 1.7 lakh crore in its pension fund. It has a subscriber base of around 5 crore and all of them are covered under the EPS-95.
The increase in wage ceiling under the scheme run by EPFO is important as it would bring in around 50 lakh more workes and increase the flow mandatory savings.