Hike in minimum pension for subscribers will need budgetary support: EPFO

An empowered committee, set up by the labour and employment ministry, in its report submitted to the govt in December had recommended that the minimum monthly member pension may be hiked to Rs 2,000

The Employees’ Provident Fund Organisation (EPFO) has informed the government that the minimum pension for its subscribers may be doubled to Rs 2,000 per month with budgetary support. 

"It will be difficult to hike the minimum pension from the present Rs 1,000 a month without budgetary support," said a senior EPFO official. However, he didn’t specify the budgetary burden should the minimum pension increases. 

An empowered committee, set up by the labour and employment ministry, in its report submitted to the government in December had recommended that the minimum monthly member pension may be hiked to Rs 2,000, provided the central government budgetary support is provided for it on a yearly basis” 

The labour ministry has now moved a Cabinet note against some of its recommendations, according to documents reviewed by Business Standard. 

However, some of the EPFO’s central board of trustee members, in a meeting held last week, demanded hiking the minimum pension to Rs 3,000 per month to bring it in line with the PM Shram Yogi Maandhan scheme for unorganised workers, which was announced in the interim Budget. 

The committee has further recommended a modification in the Employees’ Pension Scheme, run by the EPFO, to disallow pre-mature withdrawal of provident fund savings and to fix a minimum monthly contribution towards pension. 

At present, both employers and employees are mandated to contribute an equal share, 12 per cent of the monthly income component, towards EPFO. Of the total 24 per cent, 8.33 per cent goes towards the pension scheme. The government provides a subsidy of 1.16 per cent of wage for employees with less than Rs 15,000 a month towards EPS. 

At present, the minimum pension under EPS is Rs 1,000 per month and an employee can receive a pension only after a minimum of 10 years of service. The Centre gives Rs 850 crore every year on a tapering basis as annual budgetary support towards the pension scheme. 

Employees are automatically enrolled under the EPS if they are members of the Employees’ Provident Fund scheme. 

The EPFO has told its pension committee to come up with a proposal to ensure that employees’ contribution towards the pension scheme goes up through either hiking the overall share of contribution towards it or by discouraging early withdrawal of provident fund savings, an official said.