Pension corpus doubled in 5 years to FY16; reflects jobs, salaries in period
The Employees’ Provident Fund Organisation’s (EPFO) pension corpus nearly doubled to Rs 2.77 lakh crore in the five years preceding the 2015-16 fiscal, reflecting the levels of job creation and salary increases in the economy during the period. The country’s gross domestic product grew a little over 30% during the period. Higher annual collections by the retirement fund body as contributions towards the Employee Pension Scheme (EPS) than payments it made to the pensioners also resulted in accumulation of the pension corpus. The EPS, which came into effect from November 1995, is funded by contributions from employers and the central government. While employers pay 8.33% of the workers’ basic pay to EPS, the central government contributes 1.16% of the monthly wage. Apart from contribution towards EPS, an employer also pays 3.67% to the EPF, 0.5% towards EDLI, 0.65% as EPF administrative charges and 0.01% as EDLI handling fee.
In the year 2015-16, while EPFO garnered around Rs 54,000 crore in collections and interests on the previous year’s accumulations, it paid out only around Rs 13,545 crore to pensioners and those who opted for withdrawals, which is paid on exit from service or on superannuation. There has always been a big gap between the amounts credited to the pension fund and pension outgo, giving EPFO a good cushion and income. While in 2010-11, the total pension outgo was Rs 7,641 crore, it was Rs 13,545 crore in 2015-16.
An EPFO member becomes eligible for superannuation or early pension only after completing a minimum 10 years of service or attaining the age of 58/50 years. On cessation of employment before completing 58 years, a member can opt for early pension. This early pension can be availed only after completing 50 years of age and will be subject to discounting factor at the rate of 4% for every year falling short of 58 years. As on March 31, 2016, EPFO had 17.14 crore members, of which 53.85 lakh are pensioners. EPFO has around five crore active subscribers now. The government introduced a minimum pension of Rs 1,000 per month for member pensioners, widow/widower pensioners and some other categories of pensioners from 2015.