EPFO defers decision on min monthly pension of Rs 1,000
Retirement fund manager EPFO on Friday deferred its decision on the proposal for fixing the minimum monthly pension for its 50 million subscribers at Rs 1,000 because of differences among trustees over sharing of additional financial burden.
Chennai: Retirement fund manager EPFO on Friday deferred its decision on the proposal for fixing the minimum monthly pension for its 50 million subscribers at Rs 1,000 because of differences among trustees over sharing of additional financial burden.
"We discussed (pension) and now we are working out some proposal and we will put it before the government," Labour Minister Mallikarjun Kharge told reporters here.
The unionist present in the meeting opposed the EPFO's proposal of meeting the additional financial burden by either raising retirement age for pension to 60 years from 58 years or withdrawal of the two-year bonus on completion of 20 years of pensionable service.
According to the Employees' Provident Fund Organisation (EPFO), either of the two options would help in ensuring minimum pension at Rs 1,000 per month to subscribers without any additional burden on employers, employees or the government.
Kharge said: "We have also requested employers, employees and the government - all three together (that) if they contribute a small amount each ... That will solve the problem".
Admitting that the proposal was being delayed, the Minister said he would also take up the issue with the Finance Ministry for ensuring minimum pension for EPFO subscribers at Rs 1000 per month.
"The alternatives suggested by EPFO are not in the interest of workers and therefore we opposed those," All India Trade Union Congress Secretary D L Sachdev said.
"The minister has assured us that he will discuss again with the government to find a way out to give minimum pension without withdrawal of any benefit to the subscribers under the scheme," he added. According to the pension rules, in the case of an EPFO subscriber who has rendered 20 years pensionable service or more, his pensionable service is increased by adding a weightage of 2 years.
EPFO has pointed out that withdrawal of two year pension bonus will result in saving which would be sufficient to meet the additional cost of providing minimum pension of Rs 1,000 per month.
According to EPFO data, as on March 31, 2010, there were 35 lakh pensioners subscribed to the retirement fund body, of which 14 lakh persons get a monthly pension of less than Rs 500.
The number of EPFO pensioners getting a monthly pension of Rs 1,000 is 7 lakh. The data reveals there are cases where pensioners are getting a monthly pension as low as Rs 12 and Rs 38.
In case the EPFO does not opt for raising retirement age or withdrawing the two years bonus on 20 years of pensionable service, it will require an additional contribution of 0.63 percent of subscribers' basic pay and dearness allowance (either by the employee or employer) to the pension account, for fixing minimum monthly pension at Rs 1,000.
The hike in contribution would have to be over-and-above the 8.33 percent of basic pay and dearness allowance contributed by employers toward the pension account of employees, as well as the 1.16 percent provided by the government under the scheme.
In the present scenario, neither employers nor employees want to share this additional burden of 0.63 percent.
In case the government bears this additional burden, then it would have to shell out Rs 539 crore every year in addition to its existing payout of Rs 994 crore annually for contributing 1.16 percent of basic pay and DA to the pension fund.