If private sector employees get pension at the age of 60, instead of the current 58, the Employees Provident Fund Organisation (EPFO) suggests it would be possible to provide a monthly pension of Rs 1,000 to workers who don’t get any.
The proposal in question is currently the subject of a battle between employee and employer representatives in the EPFO’s Central Board of Trustees (CBT). Repeated meetings have ended without an agreement on who would finance the scheme. It was estimated to require a 0.63 per cent increase in the present provident fund contribution to pay a minimum pension of Rs 1,000 to the 1.5 million workers proposed to be covered. The scheme is expected to cost around Rs 637 crore annually.
So far, representatives of employers, employees and the labour ministry have been unable to decide who should bear the additional burden. The increase in contribution would have been in addition to the 8.33 per cent the employers already contribute and the 1.16 per cent that comes from the central government.
The EPFO, in a recommendation to the finance ministry, says employees should share the burden. It says the age for pension to start could be raised from the present 58 years to 60. That would impact employees in the private sector, where the retirement age is usually 58. The deferred payment could give enough for the pension of those who currently do not get it.
Also, it has suggested doing away with the scheme to provide a two-year bonus to employees after 20 years of service. “The money generated through these proposals would be enough to finance the scheme. We are expecting savings of around Rs 1,000 crore if these (suggestions) are implemented,” said a top official in the EPFO. “This could also see organisations increase the retirement age to 60 from 58,” the official added.
Trade unions that represent employees in the CBT are critical of the EPFO move. “We are going to oppose any such proposal,” said D L Sachdeva of the All India Trade Union Congress. “This is to put further burden on the workers. Also, a lot of workers in the private sector would have to wait for two years to get pension.”
However, employers’ representatives are not complaining. “Even if some people retiring at 58 are not getting pension, their numbers are not many. A majority of people in the private sector retire at 60,” said Sharad Patil, secretary general of the Employers’ Federation of India, who is also a member of the CBT.
The EPFO has around 3.5 million pensioners, of which 1.4 million get a monthly pension of less than Rs 500.
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