The Union labour ministry is yet to notify the UPA government’s pre-poll largesse of a minimum monthly pension to provident fund subscribers. Further, the finance ministry has agreed to provide funds for the Rs 1,000 monthly pension to the 8.85 crore subscribers only for FY15, pending an actuarial evaluation of the Employees’ Pension Scheme (EPS).
Without a formal notification of the proposal, cleared by the Cabinet on February 28 to be made effective from April 1, the enhanced benefit of the Rs 1,000 monthly pension will not be available to members.
Now, with the Model Code of Conduct in place, the labour ministry requires the Election Commission’s nod, which could further delay its implementation.
The EPS is available to all subscribers of the Employees’ Provident Fund Organisation (EPFO). Nearly a quarter of formal sector employees’ salary is transferred to their PF accounts, a little over third of which is diverted to the EPS. However, most pensioners under the scheme get paltry benefits.
Labour minister Oscar Fernandes had announced the Rs 15,000 wage ceiling for PF contributions and the Rs 1,000 minimum pension, after a February 5 meeting of the EPFO’s Central Board of Trustees. But there is a catch in the plan — the enhanced benefits could be available only for one year.
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“The proposal for ensuring the minimum pension of Rs 1,000 has been for the financial year 2014-15 only and it has been stated that re-imbursement will be made to the fund for 2014-15 by way of budgetary support…of Rs 1,217.03 crore,” said the agenda for the meeting.
The EPFO had urged the board to seek a “continued commitment from the government for subsequent years” and then implement the minimum Rs 1,000 pension proposal.
Any rollback in the benefits would be “embarrassing” and raise “public outcry”, the PF department had warned, stressing that unless the government commits resources for the enhanced pension, it can’t be sustained.
While providing funds for the first year, the finance ministry has called for an actuarial evaluation of the scheme to understand the exact financial implication on the pension scheme’s savings pool due to the increased EPF wage ceiling of Rs 15,000 per month. It has called for a slew of other reforms in the structure of the scheme, which was launched during Manmohan Singh’s tenure as finance minister in late 1995 — months before the general elections.
The payout from the EPS is expected to increase due to more employees coming into the formal sector, putting further pressure on the scheme that is already facing a deficit.
Some board members are understood to have also raised concerns over a possible rollback of the enhanced pension in case the actuarial evaluation was not completed in time or other modifications suggested by the finance ministry were not done.