EPFO is considering making some important changes to improve the Employees Pension Scheme (EPS) and increase the resources on raising funds for higher monthly pension.
To make the Employee Pension Scheme more attractive, the Employee Provident Fund Organization can make some necessary improvements. The government is preparing to give more pension to the employees who contribute to the Employee Provident Fund. The Labor Ministry and the Employees’ Provident Fund Organization (EPFO) are considering some changes to make the Employees’ Pension Scheme (EPS) more efficient and potentially increase resources on raising funds for higher monthly pensions. The issue, which was discussed in the last meeting of the Central Board of Trustees of EPFO, is expected to be high on the agenda in the next meeting to be held in February.
According to the report of Money9, this issue was discussed in the last meeting of the Central Board of Trustees of EPFO, it is expected to be discussed in the agenda in the next meeting to be held in February. Decrease in contribution by existing members and increase in the number of pensioners amid demand for hike in minimum monthly pension has raised concerns over the utility of the social security scheme.
Pensioners of EPS get a minimum guaranteed pension of Rs 1,000 and suggestions have been made to increase it in view of rising inflation. Meanwhile, the recent judgment of the Supreme Court on higher pension has raised the likely expenditure of EPFO on pension and it is estimating the exact liability arising out of the judgment.
Rs 711 per month should be contributed
There is already a mismatch between the minimum and required contribution for the scheme, according to the report. With 10 years of pensionable service, a member should contribute at least Rs.711 per month for a continuous period of 10 years to earn a minimum monthly pension of Rs.1,000. Of the 61.2 million members contributing to the scheme in 2021-22, more than half, or 34.7 million, contributed less than Rs 700 per month towards the pension.
Continuous increase in the number of pensions
As per the provisions of the scheme, the current statutory wage limit is Rs 15,000 per month, which would amount to a monthly contribution of Rs 1,250 by a member. There has also been a steady increase in the number of pensioners and pension disbursed under the scheme. As on March 31, 2022, EPS had about 7.3 million pensioners with a corpus of Rs 6.89 trillion, which is an increase of about 86.41% since 2016-17. It had disbursed Rs 20,922 crore in 2021-22 as pension and withdrawal benefits and Rs 20,378 crore in 2020-21.
This is how the basic salary gets reduced
Explain that as on March 31, 2019, the net actuarial loss of EPS was Rs 37,327 crore. Since then the situation can become even more serious. EPFO is in the process of appointing an actuary for the valuation of the pension scheme for the years 2019-20, 2020-21 and 2021-22. Officials noted that there are several reasons for low contribution such as low monthly salary and existence of non-contributory period due to leave and loss of job. Another reason could be that the salary is structured in such a way that a higher amount is paid in the form of allowances other than dearness allowance, which makes the basic salary very less.
