Fin Min approves Rs 1,000 minimum monthly pension plan
New Delhi: The Finance Ministry has approved a proposal for providing a minimum monthly pension of Rs 1,000 to workers in the organised sector, a move which would benefit 27 lakh pensioners immediately.
The ministry has also approved a proposal for raising the basic wage ceiling under the Employees Provident Fund Scheme to Rs 15,000 from existing Rs 6,500 per month.
At present, there are about 44 lakh pensioners. Of this 27 lakh, including 5 lakh widows, get less than Rs 1,000 a month.
"The Finance Ministry has approved the proposal for providing a minimum monthly pension of Rs 1,000 under the Employees Pension Scheme 1995 (EPS-95) run by EPFO. The ministry also cleared enhancing the wage ceiling to 15,000 under social security schemes run by the retirement fund body," an official source said.
The government will provide additional subsidy of Rs 1,217 crore to ensure the minimum monthly pension of Rs 1,000 starting 2014-15. Pensioners are, therefore, expected to get benefit with effect from April 1 this year.
Labour Minister Oscar Fernandes, however, is yet to decide on whether the move requires the Cabinet approval or not.
The Labour Ministry's proposal on giving a minimum monthly pension of Rs 1,000 under the EPS-95, run by the Employees' Provident Fund Organisation (EPFO), has been pending for a long time.
Earlier, the Labour Ministry had proposed that government should increase subsidy on EPS-95 from 1.16 percent of basic wage to 1.79 percent to ensure minimum pension. However, it did not find favour with the Finance Ministry as this would have resulted in a permanent increase in subsidy.
The Labour Ministry in its revised proposal has asked the Finance Ministry to provide for around Rs 1,217 crore additional amount every year, and indicated that this amount can come down over a period of time with more members subscribing to EPS-95.
The increase in the wage ceiling to Rs 15,000 would be effective only after the notification of the decision by the government.
At present, government contributes 1.16 per cent of basic wage of workers as contribution toward the EPS-95. Government had provided around Rs 1,400 crore for the purpose in 2012-13.
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.
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 workers and increase the flow of mandatory savings.