EPS merger with NPS would need amendment of law, say unions
Any move to merge the Employees Pension Scheme with the New Pension Scheme would require amendment of the Employees Provident Fund Act, which may not happen at least before the elections, according to trade unions and employers organisation.
Commenting on Finance Minister P Chidambaram’s letter to former Labour Minister Mallikarjun Kharge reported by this paper urging merger of the two schemes, trade unions said any bid to impose NPS on EPS subscribers would first require amendment and that would not be a popular move in an election year.
Both the EPF Act and the EPS make mention of pension scheme and an amendment would have to be made to replace EPS to NPS in the Act, says DL Sachdev All India Trade Union Congress State Secretary and member of the Central Board of Trustees.
He does not see any reason why employers organisations would support the New Pension Scheme as their contribution to EPFO would continue as before.
The employee and employer make 12% contribution each and 8.33% of this goes into pension along with a 1.66% contribution from the Government. So in either case, the employer has to contribute, says Sachdev.
It is an election year, and the Government is unlikely to take such an unpopular step now, he said.
We will oppose any merger. They cant shut down EPS without taking all of us into confidence. said AD Nagpal state secretary of the Hind Mazdoor Sabha and member of the Central Board of Trustees of the EPFO:
Bhartiya Mazdoor Sangh general secretary Baij Nath Rai said that the Central Board of Trustees has not been called for nearly six months and this could be an indication of the Government’s intentions regarding EPS. ‘But we wont accept merger with NPS. Pension funds are not meant for gambling. These are hard earned savings of workers and cant be gambled away in shares,’ he said, referring to the equity investments that NPS does.
S Sen member of CBT from the Confederation of Indian Industries said that EPFO has been cautious on equity as it is people’s money. I feel you need to take a balanced view, he said adding that he needed time to consider whether a merger could be a way out.
Ravi Wig, former president of PhD CHamber of Commerce and Industry and representing the National Employers Federation in CBT said that the NEF was opposed to the merger as NPS does not offer social security to the worker the way EPS does.
If a worker puts in even a day of service and dies, he gets full insurance without paying a penny under EPS. Again the returns are guaranteed and that is what ensures protection in old age, Wig said.
EPFO has already presented its case before the Finance Ministry for keeping EPS alive. In a meeting called by the ministry, last month, EPFO which comes under the Labour Ministry sent its officials to give reasons why EPS had a right to continue, and why it was much better than NPS.
One of the reasons the EPFO gave was the feature of guaranteed benefits that EPS had. It also questoined the claims of NPS that the latter earned higher returns from its investments in comparison to EPS.
EPFO pointed out that only one of the fund managers of NPS was able to get a higher return while the other fund managers earned on par with EPS.
EPFO also maintained that EPS was a cheaper pension scheme as it cost almost nothing to the investors unlike NPS where it said that processing charges ate into almost four% of the total maturity value of the fund as the charges were made on the cumulative funds each year, rather than on just the fresh savings made each year. EPS it pointed out charged only on the latter and not on cumulative savings of the investor.