Removal of wage ceiling to become member is one of the recommendations
The Social Security Association of India (SSAI), after assessing the Employees’ Pension Scheme (EPS), has recommended complete restructuring of the investment pattern of the pension fund to obtain higher returns.
The funds may be invested by the Central Board of Trustees of the scheme in infrastructure projects, long-term debts and in the real estate sector to gain higher returns without putting to risk the safety of the funds, the association said in its report released here on Saturday.
The other recommendations in the report that was prepared by K.B. Akhilesh from the Department of Management Studies, Indian Institute of Science, Bangalore, include indexation of pension, fixation of minimum pension at Rs. 1,000 a month, removal of income ceiling to become member of the EPS, and redesigning the accounting system.
Speaking to presspersons after the release of the report, association secretary-general B.N. Som said that the SSAI was involved in the framing of the EPS, 1995. The association decided assess the scheme as it had been facing severe criticism leading to fears and apprehensions about its sustainability.
The assessment included an all-India survey of pensioners, employers’ groups and trade unions covering 12 States and several cities. It began in May 2011.
The report was drafted by Mr. Akhilesh, Mr. Som and association governing body members L.D. Mishra and R.K.A. Subramanya.
The first and foremost recommendation made by the team of experts is to increase the minimum amount of pension to Rs. 1,000 a month from the present Rs. 450 a month. This requires 0.63 per cent additional contribution per month, the burden of which none of the three stakeholders – employee, employer or the government – is prepared to take up, Mr. Som said.
The association, therefore, suggested that the employers’ contribution of 0.50 per cent towards the Employees’ Deposit Linked Insurance (EDLI) scheme may be discontinued since the fund has long become self-sufficient. The fund gets an annual interest of over Rs. 2,800 crore which is more than enough to meet several years’ liability for pension hike. The 0.50 per cent contribution from employers may be utilised to offer higher pension and the Union government should make the remaining 0.13 per cent contribution as suggested by the Standing Committee on Labour in 2009.
The committee had also recommended indexation of pension saying it was an innate and inalienable component of pension. (Indexation is a technique to adjust income payments relying on price index to neutralise inflation effects.) Mr. Som said the government could cite resource crunch for this too and the funds of EDLI can come in handy for the purpose. With fewer deaths of members while in service, fund utilisation has come down and the residual interest income from this could be used for indexation of pension of erstwhile members.
Another recommendation is to remove the wage ceiling to become EPS members. Universalising pension cannot be denied as it is an essential aspect of social security and hence the ceiling should be removed, Mr. Som argued.
Yet another recommendation is about restructuring the investment pattern of the fund to gain higher returns. This could be achieved by investing in infrastructure bonds, long-term debts and real estate, he said.
Mahendra Raju, Additional Central Provident Fund Commissioner, North East India Region, was present.