Pension concerns: On the EPFO recommendation

A hike in minimum pension will help the lower strata among the retired

The recommendation of the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) for a 0.1-percentage-point increase in provident fund (PF) deposits for 2023-24 should not be surprising, as it is in tune with what the EPFO did last year. However, the recommended (suggested as being good or suitable for a particular job or purpose, or suggested as an action that should be done) rate of 8.25% is 0.4-percentage points lower than in 2018-19, a pre-election year like 2023-24. If cleared by the Union Finance Ministry, it will involve the transfer of a record ₹1,07,000 crore to EPF members. But the development has not pleased those with a long-standing demand (to ask for something forcefully, in a way that shows that you do not expect to be refused) for an increase in the minimum pension (a sum of money paid regularly to a person who has retired (= stopped working because of having reached a certain age) of ₹1,000. When in the opposition, the ruling Bharatiya Janata Party had demanded that the pension be raised to ₹3,000 (the UPA government had proposed ₹1,000 a month). On coming to power in 2014, the BJP carried out faithfully, with effect from September 2014, what was finalised by its predecessor (someone who had a job or a position before someone else, or something that comes before another thing in time or in a series), benefitting approximately (close to a particular number or time although not exactly that number or time) 20.5 lakh pensioners. Months ago, the Finance Ministry had rejected a proposal to double the minimum pension amount, citing a “huge rise” in the budgetary (related to the amount of money that is available to spend) support needed under the Employees’ Pension Scheme (EPS), 1995. There is one more component (a part that combines with other parts to form something bigger) in the budgetary support which refers to the Central government’s contribution at 1.16% of wages up to an amount of ₹15,000 a month. For FY2024-25, the Ministry has projected ₹10,950 crore as budgetary support against the revised estimate (to guess or calculate the cost, size, value, etc. of something) of ₹ 9,760 crore for the current year. The Finance Ministry calculates that a 100% rise in the minimum pension would be more than the proportionate (in correct relation to) increase in the overall budgetary support as numerous pensioners had received much less than ₹1,000 as monthly pension till 2014.

Describing the EPS as a “Defined Contribution-Defined Benefit” social security scheme, the government said in the Rajya Sabha that all benefits were paid out of accumulations (to gradually increase in number or amount) through contributions (payments from a company or employee to pay for an employee’s benefits such as medical insurance or a pension), and as per the fund’s valuation (the act of deciding how much money something might be sold for or the amount of money decided on) as on March 31, 2019, there was “an actuarial deficit.” However, this argument has been virtually demolished (to completely destroy a building, especially in order to use the land for something else) in the EPFO’s annual report (2022-23). Notwithstanding its reasons not to hike the minimum pension, the government must note that the difference between the minimum and original pension was about ₹970 crore for 2022-23. So, the doubling of minimum pension is no strain. There are other key issues too such as equating (to consider as the same, or to connect in your mind) the amount of spouse pension on a par with what a member-pensioner gets. In the case of higher PF pension, the rules have been framed after the 2022 Supreme Court judgment (the ability to form valuable opinions and make good decisions) wherein most of the pre-2014 retirees would not be covered; there are around four lakh such applications for higher pension. A more expansive (covering a large area) approach to PF pension matters will help senior citizens.

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