The Union Finance Ministry has turned down a request from the labour ministry to increase the monthly minimum pension in the Employee Pension Scheme (EPS), Business Standard reported. This decision was communicated to the Central Board of Trustees (CBT) during a meeting on Saturday.
According to sources quoted by the Business Daily, a proposal to raise the minimum pension under EPS from ₹1,000 to ₹2,000 per month was sent to the Ministry of Finance based on recommendations from a government-appointed monitoring committee. However, the Ministry of Finance declined to approve the proposal.
Minimum Pension Under EPS, 1995
Since September 1, 2014, the Government has been providing a minimum pension of ₹1000 per month to pensioners under the Employees’ Pension Scheme (EPS), 1995.
The EPS, 1995 operates as a ‘Defined Contribution-Defined Benefit’ Social Security Scheme. The Employees’ Pension Fund is funded by contributions from employers at 8.33% of wages and contributions from the Central Government, capped at 1.16% of wages up to ₹15,000 per month. All scheme benefits are financed from these accumulations.
According to the Employees’ Provident Fund Organisation’s (EPFO) annual report for FY23, there are a total of 7.55 million pensioners. Of these, 3.64 million receive pensions up to ₹1,000 per month, followed by 1.17 million who receive pensions ranging between ₹1,001 and ₹1,500. Additionally, around 868,000 pensioners receive pensions between ₹1,501 and ₹2,000 per month. Moreover, only 26,769 pensioners receive amounts exceeding ₹5,000 per month, Business Standard reported.
In March 2022, the Parliamentary Standing Committee on Labour directed the labor ministry to collaborate with the finance ministry to ensure adequate budgetary support, highlighting the insufficiency of the current ₹1,000 monthly pension.
The interest rate on employee provident fund was raised to 8.25% for the fiscal year ending March 31, marking the highest rate in three years.
The labor ministry announced that the central board of trustees of EPFO proposed to the finance ministry to increase the interest rate for nearly 8 crore contributing subscribers.
As per the labor ministry statement, this decision was made during the 235th meeting of the Central Board of Trustees (CBT) of EPFO on Saturday, chaired by Union Labour & Employment Minister Bhupender Yadav.
“The CBT recommended an annual interest rate of 8.25% to be credited on EPF accumulations in members’ accounts for 2023-24. After approval by the Ministry of Finance, this interest rate will be officially notified in the government gazette. Subsequently, EPFO will credit the approved rate of interest into its subscribers’ accounts,” it stated.
This marks the highest interest rate for EPF subscribers in the last three years. The previous peak was in 2019-20 when 8.5% interest was paid. It remained at the same level in 2020-21 but dropped to 8.1% the following year, the lowest in four decades.
The interest rate was marginally increased to 8.15% in 2022-23 (April 2022 to March 2023).
The recommendation for the 2023-24 fiscal year will now be forwarded to the finance ministry. Once approved, EPFO will credit the new interest rate to the EPF subscribers.
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Published: 12 Feb 2024, 01:27 PM IST
