The Employees’ Provident Fund Organisation (EPFO) is considering allowing its subscribers to voluntarily contribute to the employment pension scheme (EPS), in keeping with the government’s policy of creating a pensioned society.
Organised sector employees, including those belonging to the private sector, earning less than `15,000 per month, are now eligible for pension under EPS. Also eligible are those whose wages were less than `15,000 a month at the time of the appointment. The minimum pension payable under EPS is `1,000 a month.
In case of workers as defined above, the employers contribute 8.3% of `15,000 or `1,250 a month to the EPS corpus. “We are now trying to create another layer of pension which is voluntary. Under this, if a subscriber wants to increase her pension, he/she can voluntarily contribute more money from her EPF profile to the EPS,” the newly appointed Chief Provident Fund Commissioner (CPFC) V P Joy told FE. The government also provides 1.16% subsidy to the scheme.
Employees currently do not contribute to the EPS, their entire 12% contribution goes to the Employees’ Provident Fund (EPF). On attaining the age of 58, an EPF member automatically ceases to be a member of the employees’ pension scheme (EPS).
Around 32 lakh pensioners get meagre pension now as that is calculated on the basis of pensionable service and average of last 60 months’ wages. If either of them is low, the pension amount will also be low, which is not commensurate with the cost of living.
The proposed voluntary contribution, if allowed, would have to be entirely borne by the employees; there would neither be any government subsidy nor any contribution from the employers. There would be a cap on how much can one contribute to the new scheme, which would be managed by EPFO, but the limit is yet to be decided.
It is also still undecided whether the additional contribution can be made anytime during the course of job or only at time of retirement from the PF corpus. “We are working on finer details. Once we are done, we will make a proposal to the government,” Joy said.