A big news has come out for lakhs of employees covered under the Employees Provident Fund Organization (EPFO). Recently, Chennai EPF Pensioners Welfare Association has written a letter to Union Labor and Employment Minister Mansukh Mandaviya demanding increase in the minimum pension to Rs 9,000 per month. This demand comes at a time when the government has recently announced the Unified Pension Scheme (UPS) for government employees.
At present, employees covered under EPFO get a minimum pension of Rs 1,000 per month under the Employees’ Pension Scheme (EPS) 1995. This amount was fixed in 2014 and there has been no change since then. In such a situation, in view of rising inflation and rising cost of living, there is a continuous demand for increase in pension from private sector employees.
EPFO Pension Scheme: At a Glance
| Description | Information |
| current minimum pension | Rs 1,000 per month |
| proposed minimum pension | Rs 9,000 per month + dearness allowance |
| beneficiary | About 75 lakh EPFO pensioners |
| Plan | Employees Pension Scheme (EPS) 1995 |
| pension formula | (Last 60 months basic salary |
| employer’s contribution | 8.33% of the employee’s basic salary |
| employee contribution | 12% of basic salary |
| Eligibility | 10 years of service and 58 years of age |
Why the demand for increase in EPFO pension?
Due to rising inflation and high cost of living, the minimum pension of Rs 1,000 is not considered sufficient. Chennai EPF Pensioners Welfare Association says that while government employees are getting benefits under the Unified Pension Scheme, private sector employees should also get similar facilities.
The association has said in its letter that there are around 75 lakh pensioners covered under EPS 1995, while only 23 lakh central employees will benefit from the Unified Pension Scheme. Therefore, the concerns of EPFO pensioners should also be taken into consideration.
Current EPFO Pension System
• Minimum pension: Rs 1,000 per month (applicable from 2014)
• Pension Formula: (Last 60 months basic salary
• Contribution:
- Employees: 12% of basic salary
- Employer: 12% of basic salary (of which 8.33% goes to pension fund)
• Eligibility: 10 years of service and 58 years of age
Proposed changes and demands
- Minimum pension: Rs 9,000 per month + dearness allowance
- Salary limit: Proposal to increase from present Rs 15,000 to Rs 21,000
- Amendment in pension formula: so that employees can get more benefits
- Inclusion of dearness allowance: To deal with rising prices
Benefits of increasing EPFO pension
- Better standard of living: Pensioners will be helped to meet their expenses in a better way.
- Financial security: You will get relief from financial worries in old age.
- Equity: The gap in pension benefits between government and private sector employees will reduce.
- Encouragement to savings: People will be motivated to save more during their tenure.
EPFO Pension: From Past to Present
• 1995: Introduction of Employee Pension Scheme (EPS)
• 2014: Minimum pension fixed at Rs 1,000 per month
• 2023: Labor Ministry proposes Rs 2,000 minimum pension (not accepted)
• 2024: Demand for Rs 9,000 + DA raised
Suggestions to increase EPFO pension
- Gradual increase: Instead of a big increase all at once, pension can be increased in a phased manner.
- Change in investment strategy: Higher returns can be achieved by changing the investment pattern of EPFO funds.
- Expansion of coverage: The fund can be strengthened by bringing more employees under the ambit of EPFO.
- Voluntary Contribution: Employees can increase their pension by giving them the option to make additional contributions.
- Tax Incentives: Tax benefits may be given for higher contributions to pension plans.
Possible effects of increasing EPFO pension
- Increase in economic activity: Higher pensions will increase the purchasing power of senior citizens, which can boost the economy.
- Improvement in social security: Will ensure better financial security for the elderly.
- Impact on the labor market: Better pension benefits could help attract a younger workforce.
- Increase in savings and investments: People will be motivated to save and invest more for the future.
Possible reforms in EPFO pension scheme
- Digitization: Efficiency can be increased by making the pension process completely digital.
- Portability: Portability of pension account can be made easy when changing jobs.
- Transparency: More transparency can be brought in the management and investment of pension funds.
- Flexibility: Employees may be allowed to customize their pension plan as per their needs.
EPFO Pension: International Comparison
It is important to compare India’s EPFO pension scheme with the pension systems of other countries:
- Japan: Strong pension system for older population
- Sweden: flexible and stable pension system
- Australia: compulsory superannuation system
- Chile: system based on private pension funds
By learning from the experiences of these countries, India can further improve its EPFO pension scheme.
Disclaimer
This article has been written for information purposes only. Currently, there is no official rule or announcement made by EPFO to reduce the minimum pension amount to Rs 9,000 per month. This demand has been raised by some pensioner organizations, but till now the government has not taken any decision on this. Readers are advised to rely only on the official website of EPFO or government notifications. Seek expert advice before taking any financial decisions.