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Money Aug 21, 2012

Good news: EPFO pension may be hiked to Rs 1,000 a month

By Firstbiz Staff

Subscribers of the retirement fund body EPFO may soon get a minimum monthly pension of Rs 1,000 after superannuation, if a proposal in this regard is cleared by the Finance Ministry.

"Labour Ministry has recently sent a proposal to the Finance Ministry to fix minimum pension to the EPFO subscribers at Rs 1000, no matter what their contribution is towards the scheme," a source privy to the development said.

On the recommendations of the Employees Provident Fund Organisation (EPFO), the Labour Ministry has proposed to the Finance Ministry to either withdraw the two year bonus given to subscribers on completion of 20 years of service or bear additional burden of Rs 539 crore every year for fixing minimum pension of Rs 1,000.

According the the EPFO, if this two year bonus is withdrawn, the exercise of fixing minimum pension at Rs 1,000 would be a revenue neutral exercise besides pensioners getting about 5 per cent relief.

However, whether the government or the workers will fund this additional Rs 539 crore a year cost remains to be seen.

According to a report in the Times of India, both the labour and finance ministry are in favaour of withdrawing the two-year bonus given to every employee who completes 20 years of work rather than making the government foot the bill for the entire increase.

But central trade unions may oppose the move. "You are essentially taking away what is the earned right of the employee," D L Sachdev, EPFO trustee and national secretary of the All India Trade Union Congress, told TOI.

At present every subscribers who completes 20 years of service is given benefit of additional two year bonus while tabulating his or her pension.

According the the EPFO, if this two year bonus is withdrawn, the exercise of fixing minimum pension at Rs 1,000 would be a revenue neutral exercise besides pensioners getting about 5 per cent relief.

However, if the Finance Ministry does not go for this alternative, the government would have to shell out Rs 539 crore every year in addition to its existing payout of Rs 994 crore annually for contributing 1.16 per cent of basic pay and DA to the pension fund.

According to data, as on March 31, 2010, there were 35 lakh EPFO pensioners of which 14 lakh get a monthly pension of less than Rs 500.

The number of EPFO pensioners getting a monthly pension of Rs 1,000 is 7 lakh. The data reveals there are cases where pensioners are getting a monthly pension as low as Rs 12 and Rs 38.

With inputs from Agencies

by Firstbiz Staff

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