The story so far:
Nearly 78 lakh Provident Fund (PF) pensioners across the country under the Employees’ Pension Scheme, 1995 (EPS-95) of the Employees’ Provident Fund Organisation (EPFO) will receive their pension through any bank, any branch from January 1, 2025. The Union Labour Ministry cleared the proposal earlier this month for a Centralised Pension Payment System (CPPS) as part of the EPFO’s ongoing IT modernisation project, the Centralised IT Enabled System.
What contributed to the formulation of this new arrangement?
At present, if a pensioner decides to migrate, they have to seek the transfer of Pension Payment Orders (PPO) from one office to another. This has invariably resulted in complaints from pensioners about the delay in transfers, and subsequent payments. Moreover, pensioners can draw their monthly pension only through a group of three or four banks empanelled with the EPFO at every zone or region.
The new facility has been made possible in the wake of the implementation of the CPPS, which has been approved by the Union Ministry of Labour and Employment, according to the Minister and Chairperson of the EPFO’s Central Board of Trustees, Mansukh Mandaviya, in a statement issued on September 4. In the next phase, CPPS will enable a smooth transition to an Aadhaar-based payment system. The pensioners will no longer need to visit the branch for any verification at the time of commencement of pension and the pension shall be immediately credited upon release, the government said. The EPFO expects a significant cost reduction in pension disbursement after moving to the new system.
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Will the proposed arrangement make things easier for pensioners?
“On the face of it, we welcome the development even though we are waiting for the full details of the announcement. Everything depends upon implementation, during which we will come to know whether there are practical difficulties or not,” said K.P. Babu, general secretary of the Chennai EPF Pensioners’ Welfare Association and Organising secretary of the All India Co-ordination Committee of EPF Pensioners’ Associations. However, he added that for all practical purposes, many pensioners, like any other group of bank customers, draw money through ATM cards, thanks to the core banking system.
Has the announcement satisfied pensioners?
To many pensioners, the Union Ministry’s decision has been a disappointment, as they expected the government to provide them with a pleasant surprise, just as it has done for its government staff — a unified pension scheme which seeks to combine many features of the Old Pension Scheme (OPS) and the New Pension Scheme (NPS).
Trade unions and even Members of Parliament, cutting across party affiliations, have been urging the government to hike the minimum pension amount of ₹1,000. Late last month, a BJP MP from Gujarat, Shobhanaben M. Baraiya, wrote to the Minister saying, that approximately seven years ago, the request for hiking the minimum pension to ₹7,500 along with dearness allowance (DA) and medical allowance was “assured consideration.” The Chennai EPF Pensioners’ Welfare Association, the EPS- 95 Retired Employees’ Welfare Association, Mysuru, and the Provident Fund Pensioners’ Association, Kochi, have been seeking ₹9,000 plus DA. The same demand was raised by trade unions during their pre-Budget consultation with Union Finance Minister.
What is the status of applications by PF pensioners and members for pension on higher wages?
PF members and pensioners are increasingly anxious over how their applications for pension on higher wages are being processed. Many of them had nursed the hope that they would get higher pension immediately after the Supreme Court’s judgment in November 2022 which approved, as a matter of principle, the payment of pension on wages that exceeded the PF ceiling. However, a recent reply from the EPFO under the Right to Information Act showed that as of August 7, 2024, the number of applicants who were issued PPOs was 8,401, which included two from those who retired before September 1, 2014. Besides, demand notices were sent to 89,235 other applicants, requiring them to transfer their share of arrears. Nearly 17.5 lakh applications had been submitted online, of which about 1.5 lakh were rejected.
What is the Union government’s position?
As regards the hike in minimum pension, the Centre has been citing financial constraints, though it has been increasing its allocation annually for the EPS-95.
The government’s contribution to the Pension Scheme is at the rate of 1.16% of the basic wages of employees, apart from providing budgetary support to ensure the minimum pension payment. The Pension Scheme is also getting funds through the transfer of 8.33% of the Provident Fund contributions by employers. An official document reveals that during 2022-23, the government’s contribution was approximately ₹8,785 crore and it was ₹ 9,760 crore for 2023-24. For 2024-25, the bill would be ₹10,950 crore. Under these circumstances, it remains to be seen to what extent the Union government will increase the minimum pension amount.
On the issue of pension on higher wages, the EPFO was originally against it, as the body had contended that the EPS-95 was meant for economically weak workers, who had, proportionately, contributed more than the high wage earners. The “reverse subsidy” was an “anomaly,” which was corrected by the modifications in 2014. Even now, its stand has been that it cannot be liberal in granting pension on higher wages as this would affect the sustainability of the Pension Fund. However, till now, the fund has not witnessed any cash flow problems, despite there being a projected actuarial deficit in the valuation. There has been a widespread complaint that the PF body has been “unrealistic” in seeking very old documents from pensioners, members, and employers.
What is the way forward?
Apart from increasing its contributions substantially to the EPS-95 and revising upwards the ceiling for PF contributions from ₹15,000 which was fixed 10 years ago, the Union government should implement the idea floated by former Union Finance Minister Arun Jaitley, during his Budget speech in February 2015, that an option be given to employees to invest in the EPF or the NPS, a move which will take care of the issue of returns on investment. This is not to overlook the fact that since 2015, the EPFO has been investing in exchange-traded funds (ETF), as notified by the Union Labour Ministry. The exclusion of the applicability of EPS-95 to those who joined after September 1, 2014, and earned more than the ceiling has to be removed, making pension eligible to all employees, regardless of the pay.
Published - September 15, 2024 03:25 am IST
