EPFO, the retirement fund organization, is looking at a new pension product to offer workers in the organized sector who earn basic wages of more than ₹15,000 per month and are not mandatory covered under the Employees’ Pension Scheme 1995.
All employees in the organized sector whose basic wages (basic pay plus dearness) are up to now ₹EPS-95 covers 15,000 monthly at the time of service joining.
“There has been a demand for higher pensions on higher contributions among employees of the Employees’ Provident Fund Organization (EPFO). Therefore, the EPFO is actively considering a new scheme or product to provide a pension for people whose monthly basic wage is more than $2,500. ₹PTI was informed by a source familiar with the development that 15,000 were involved.
As per the source, the proposal on this new pension product could come up for discussion in the meeting of EPFO’s apex decision-making body Central Board of Trustees (CBT) on March 11 and 12 at Guwahati.
During the meet, a sub-committee constituted by the CBT on pension-related issues in November 2021 would also submit its report.
The source explained that there are EPFO subscribers who are getting more than ₹ 15,000 monthly basic wages who are forced to contribute lower (at the rate of 8.33 percent of ₹ 15,000 per month into EPS-95) and thus they get the lower pension.
The EPFO had amended the scheme in 2014 to cap monthly pensionable basic wages to ₹ 15,000.
The threshold of ₹ 15,000 applies only at the time of joining service. It was revised upward from ₹ 6,500 from September 1, 2014, in view of price rise and pay revisions in the formal sector.
Later, there were demands and deliberations to raise the threshold monthly basic wage to ₹ 25,000, but the proposal was not approved.
As per industry estimates, raising pensionable pay could have brought 50 lakh more formal sector workers under the ambit of EPS-95.
The source said there is a need for a new pension product for those who are either forced to contribute lower or who could not subscribe to the scheme as their monthly basic wages were higher than ₹ 15,000 at the time of joining service.
The source further added that there is no move to hike the pensionable salary cap by the EPFO in the immediate future and in that scenario, the body has to think about giving coverage to those formal sector workers who are excluded from the EPS-95 due to higher basic wages.
The matter of pensionable salary cap is also sub-judice in the Supreme Court. In 2014, Kerala High Court allowed the employees to contribute to the EPS-95 on the basis of the actual basic wages drawn by them.
In April 2019, the top court had dismissed a special leave petition filed by the EPFO against the Kerala High Court judgment. In January 2021, the Supreme Court recalled the dismissal order in the review petitions filed by EPFO.
In February 2021, the Supreme Court restrained the high courts of Kerala, Delhi, and Rajasthan from initiating contempt proceedings against the Centre and EPFO over the non-implementation of their verdicts.
