EPS 95 revamp: An endless wait for retired private sector pensioners

LN Revathy Coimbatore | Updated on February 06, 2018

The undue delay in the constitution of a high-level committee to revamp the Employees’ Pension Scheme (EPS) 1995 has made millions of retired private sector pensioners wonder if the government would come to their aid during their life time. For, come July, it will be a year since then Labour Minister Bandaru Dattatreya had gone on record stating that the government would constitute a high-level panel to revamp the EPS and plug gaps, if any, in the process.

Six months have gone by but there has been no sign of revamping the scheme, nor has there been any mention in the recent Budget announcement. It has not undergone any big structural change in the last 20-odd years either. A Supreme Court ruling in November last had raised the hopes of pensioners, who believed they would get a higher pension as the court had directed the Employees’ Provident Fund Organisation (EPFO) to divert the money from the provident fund of the retirees to the pension account retrospectively and pay pension on the higher salary. But this came under cloud with the stand taken by EPFO. (It appears that only those pensioners who went to court managed to get a hefty hike).

What is EPS

It is a known fact that every employee in the organised sector contributes 12 per cent of his/her basic salary + DA to EPF. A matching contribution is made by the employer, of which 8.33 per cent goes to EPS. There is a ceiling on the salary that is considered for EPS deduction. Till September 2014, this contribution was capped at 8.33 per cent of Rs 6,500, which worked out to Rs 541. The capped wage was subsequently increased to Rs 15,000 and the contribution to EPS increased to Rs 1,250 (8.33 per cent of Rs 15,000).

According to EPS rules, an employee with the consent of the employer can hike the contribution to 8.33 per cent of the actual salary (if it exceeded the capped wage of Rs 15,000). This provision was in force till September 2014, when EPS saw some major amendments to the scheme.

The amendments include :1. EPFO notified that new employees who earned more than the capped wages (of Rs 15,000) would not be eligible for EPS; 2. existing subscribers, who were contributing on higher salary could continue to do so, provided they made a fresh request along with the employer within 12 months; and 3. for employees who were contributing on capped wages, the option to up contributions was no longer available.

There were several categories of employees, such as those that joined after September 2014 and earned more than Rs 15,000 and were, therefore, not covered by the pension scheme, existing employees – contributing on higher salary and others - contributing on capped wages.

Plight of private sector retirees

Pensioners, particularly retirees from the private sector, aver that the government should step in to revamp the scheme in toto, and bring some parity in the pension structure of government and private sector employees. “With escalating inflation and falling interest rates, the middle class is left with fewer options for a stable income post-retirement,” says R Yegya Narayanan, a retired private sector employee, stressing the need for an immediate revamp of the pension scheme.

He had, like many other pensioners, submitted an application to his former employer for pension revision in the wake of the Supreme Court's verdict, which has since been forwarded to the EPFO, besides drawing the attention of the PMO to the issue. But the reply from the PMO's office “has been totally disappointing”. They simply said the appeal for “enhancement of minimum pension will not be possible as EPS 1995 is a self-funded scheme, with contributions of 8.33 per cent of wages from the employer and 1.16 per cent of wages by the Centre. Since the year 2000, the fund had run into deficit and no additional relief could be paid. In spite of the fund deficit, the government has enhanced the minimum pension to Rs 1,000 per month by providing budgetary support,” Narayanan told this correspondent, sharing the copy of the mail sent to the PMO.

Questioning the stand, he said “we were of the view that even those who did not go to court for pension revision were eligible for higher pension provided they paid back to EPFO the amount received as matching PF payment and interest, thereon, when they retired. Denial of this opportunity is gross discrmination. Should they now approach the court to seek similar relief?,” he asks, highlighting the plight of senior citizens and the lack of social security for such ageing population in the country. “With the Lok Sabha polls due in early 2019, the issue brooks no delay,” he added.

Published on February 06, 2018

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