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Wednesday 19 February 2020

Pension to arrive late by 2 years, but workers will not complain

Pushing the age of pension by two years, the government will save Rs 30,000 crore; the amount it owes to EPFO has been accumulating since 2014-15

The Narendra Modi government is all set to change the rules of the Central Employees Provident Fund Organisation (EPFO) related to pension. The age limit for an individual that will qualify him or her for a pension will be increased soon. Former employees will no longer start getting a pension at the age of 58 years; they will now have to wait until they are 60. But the government sector workers will hardly complain. The reason follows.

The government may increase the retirement age of employees by two years, too, by changing the EPF Act, 1952. This could be considered in the second meeting of the Employees Provident Fund Organisation (EPFO) ​​Central Board Trust in November.

If the pension of an individual arrives late, his age of retirement is arriving late, too. This means that he will be earning his salary instead of beginning to get a pension between the ages of 58 and 60. However, since he continues to work in this period, for the state it is a productive cost. At the same time, the delay in starting his pension relieves the government of the amount it owes to the EPFO to some extent.

After receiving approval from the Central Board Trust, the Labour Ministry will forward the proposal for cabinet approval. Amending the current EPFO ​​rule, the retirement age of employees will be increased by two years with this decision and the pension fund will get a relief of Rs 30,000 crore.

The Union government owes Rs 9,115 crore to the EPFO. The government is not able to give this amount to EPFO ​​due to financial pressure. A senior official was quoted in Live Mint as saying that this figure of cumulative arrear of EPFO ​​is as of March. A larger amount has accumulated ever since.

The government’s contribution to the Employee Pension Scheme (EPS) totals to an outstanding amount of Rs 8,036.66 crore. The rest of the money is owed due to the Minimum Pension Fund for people working on lower wages in the unorganised sector.

The report says that the government has talked to EPFO ​​officials on this matter. Officials have expressed concern that due to the increasing arrears, the EPFO ​​is unable to decide on the increase in pension for its members. Under the EPS, the Union government contributes an additional 1.6% to pension subscribers who pay less than Rs 15,000. Under the EPF Act, an employee deposits 12% of his salary as an EPF contribution. The employer deposits the same amount in the account of the employee. The employers’ contribution of 8.33% goes to EPS and the remaining amount is added to the EPF amount.

An official was quoted in the report as saying that the Union government has not contributed the annual amount to EPS since the financial year (FY) 2014-15. However, the government is giving a part of its share arrears every year. In FY 2018-19, the central government was supposed to contribute Rs 5,483 crore to EPS. However, the government has only given an arrear of Rs 3,900 crore during this period.

In the financial year before 2014-15, in the year 2005-06 and 2012-13 also, the government had deposited only a part of what it owed by withholding its EPS contribution. Till March 2014, the government owed a total of Rs 2,882.88 crore, which has now trebled.

However, in the case of minimum payment, the government has given a larger part of its contribution in order to reduce the outstanding amount. Till FY 2016-17, the government owed a total of Rs 1,198.63 crore, which has come down to Rs 1,051 crore in March 2019.

The EPFO charges interest also on arrear contribution of the Centre. Another government official has been quoted as saying that, at present, the pension outgo is not high; so there is no problem in managing it. However, problems can begin if this increases. The Labour Ministry is in constant contact with the Finance Ministry regarding this matter.

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