EPFO to decide on minimum monthly pension of Rs 1,000 on Friday
New Delhi: Retirement fund manager EPFO will take a decision on the proposal for fixing the minimum monthly pension for its 50 million subscribers at Rs 1,000 at the meeting of its trustees on Friday.
The Central Board of Trustees (CBT), the apex decision making body of the EPFO, will consider various options for sharing the additional burden for ensuring minimum monthly pension for its subscribers.
As per the agenda of the CBT meeting, Employees Provident Fund Organisation (EPFO) has suggested that either retirement age for pension be raised to 60 years from 58 years or the two-year bonus on completion of 20 years of pensionable service be withdrawn.
Either of the two decisions, it added, would help in ensuring minimum pension at Rs 1,000 per month to subscribers without any additional burden on employers, employees or the government.
After discussion with Labour Ministry on the issue, EPFO has suggested two options to CBT for ensuring minimum pension of Rs 1,000 per month.
However, according to the unionists, either of the two options to ensure minimum pension would affect subscribers and that they will oppose the move during the trustees meeting on May 25.
"If the retirement age is increased to 60, then the workers would have to contribute for two more years. In case the two years bonus is withdrawn then their pension would be fixed at a lower level as per the formula for the calculation for the pension," All India Trade Union Congress Secretary D L Sachdev said.
"We will oppose the two moves suggested by the EPFO for ensuring minimum pension at Rs 1,000 per month," 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 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.