look news india
Crores of organized sector employees of the country and more than 85 lakh retired pensioners covered under EPS-95 (Employees’ Pension Scheme 1995) have received a big blow from the Central Government. The government has made its position completely clear in Parliament on the long-pending demand of increasing the minimum monthly pension under the Employees’ Provident Fund Organization (EPFO) from Rs 1,000 to Rs 7,500 per month. Answering a starred question asked in the monsoon session of Parliament, the Union Ministry of Labor and Employment clarified that at present no new proposal or decision to increase the minimum EPS pension to Rs 7,500 is under consideration of the government. After this clarification from the government, there is huge disappointment among pensioner organizations and senior citizens across the country.
What question was raised in the Parliament and what was the answer of the Labor Ministry?
Referring to the protests being held by the EPS-95 pension scheme and the National Action Committee (NAC), the MPs in the Lok Sabha were asked whether in the era of rising inflation, the government is making any concrete plan to increase the minimum monthly pension from ₹ 1,000 to ₹ 7,500 per month and add dearness allowance (DA) on it. On this, the Minister of State for Labor and Employment told the House in a written reply that the government has received several memorandums from various trade unions, public representatives and pensioner associations to increase the minimum pension. However, keeping in mind the actuarial valuation of the EPS-95 scheme, long-term sustainability of the fund and the huge financial burden on the exchequer, no formal decision has been taken at present to increase it to ₹7,500.
Why was there a demand for minimum pension of Rs 7,500?
At present, the minimum pension amount to be received by retired employees under EPS-95 is fixed at only Rs 1,000 per month, which was notified by the Central Government in the year 2014. Over the past decade, prices of essential commodities, food items and health services have increased manifold. Pensioners’ associations and employee unions argue that a nominal amount of Rs 1,000 has become impossible to meet even the expenses of basic medicines and two meals for an elderly couple. For this reason, EPS-95 National Struggle Committee (NAC) organized dharnas, hunger strikes across the country and strong protests at Jantar Mantar in Delhi, in which the demand for raising the minimum pension to ₹ 7,500 as well as free medical facilities and interim relief was prominently raised.
Financial and budgetary challenges facing the government
According to Labor Ministry officials and financial analysts, the EPS fund is a pool fund based on a ‘defined contribution and defined benefit’ model. In the current system, 12% of the employee’s basic salary goes to EPF, while out of the 12% of the employer (company), 8.33% is deposited in the Pension Fund (EPS). Apart from this, the Central Government also bears budgetary support of 1.16% on the contribution up to the salary limit of Rs 15,000. If the minimum pension is directly increased from ₹1,000 to ₹7,500, there will be an additional financial burden of thousands of crores of rupees annually on the exchequer and pension funds, which may jeopardize the sustainability of the fund (Actuarial Deficit) for future new account holders. The government says any pension increase needs a solid and sustainable funding model to continue over the long term.
Consideration is also going on to increase the wage ceiling.
There is also an intense discussion taking place in the meetings of the Central Board of Trustees (CBT) of EPFO that the mandatory wage ceiling for EPF and EPS should be increased from the current Rs 15,000 to Rs 25,000. Experts believe that if the government revises the salary limit, it will increase the monthly PF and pension contributions of employees and employers, which will lead to a huge increase in the overall corpus of EPS. Only after the increase of this fund can there be scope for a rational increase in the minimum pension amount in future. At present, existing pensioners have to be content with the settlement of cases under the Supreme Court’s Higher Pension option and the statutory minimum limit of Rs 1,000.