In some good cheer for formal sector workers, the government is considering a plan to provide them with a Rs 1,000 minimum monthly pension.
The labour ministry, which had in August this year, notified the minimum monthly pension of Rs 1,000 to subscribers of the Employees’ Pension Scheme who earn less than Rs 15,000 a month, now wants to provide the benefit in perpetuity.
“When it was notified, the benefit was limited to EPS subscribers only for the current fiscal. We are looking to provide the facility to members in perpetuity,” said a senior official familiar with the development.
The issue is expected to be discussed at a meeting of the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) on December 19. The EPS is an affiliated scheme of the EPFO that is available to members who earn up to Rs 15,000 a month. Of the 24 per cent contribution deducted from a worker’s monthly basic pay for provident fund, 8.33 per cent was diverted to the EPS.
Sources said that the EPFO is also planning to amend the EPS to make it more viable. Further, valuation reports of the EPS will also be presented to the trustees that would give a better picture of the liabilities under the scheme and how well prepared it is to fund the burden of a Rs 1,000 monthly pension in perpetuity.
Started in 1995, the EPS provides benefits to over 28 lakh pensioners but is estimated to have a huge deficit.
To fund the higher pension for 2014-15, the Centre had to pitch in with an additional subsidy of Rs 1,217 crore. Meanwhile, the CBT will also consider a proposal to increase the EPFO’s limit for investment in private sector bonds to 15 per cent from the current 10 per cent, said the agenda for the meeting.
“In order to utilise the opportunity of earning best possible returns from the available pool of private sector companies it is proposed to increase the limit in private category up to 15 per cent from existing 10 per cent,” said the agenda.
With the adoption of the new pattern of investment from January 1, the retirement fund manager is permitted to invest in private sector category dual AAA rated banks term deposits that have fetched good returns.