Non-govt pensioners to once again get commuted value of pension after 15 years

Our Bureau New Delhi | Updated on August 22, 2019 Published on August 22, 2019

Meeting of central board of pension body also approves proposal for selection of ETF manufacturers through public bidding

There is good news for pensioners under the Employees’ Provident Fund Scheme (EPFO), as the commuted value of pension after 15 years of drawing commutation, is to be restored. This will benefit over 6.3 lakh non-government pensioners.

The Central Board of Trustees (CBT), the apex policy-making body of the pension scheme, has approved the proposal to recommend an amendment in the Employees' Pension Scheme (EPS) 1995 for restoration of commuted value of pension to pensioners after 15 years of drawing commutation. This was a long-pending demand of the pensioners. A meeting of the CBT, chaired by Labour Minister Santosh Kumar Gangwar, met in Hyderabad on Wednesday.

The commuted value is the net present value of a future financial obligation. The total pension obligation is a product of long-term interest rates and life expectancy based on mortality tables. Depending on the age at which an employee separates from service, the number of years he or she is expected to be alive to receive pension payments and the assumed rate of return on a lumpsum investment needed to generate those payments, are used to determine the commuted value. Upon separation from service, a retiring employee is given the option of taking a lumpsum payout of the pension's commuted value.

Other key decisions

Selection of ETF manufacturers: The board approved the decision to choose Exchange Traded Fund (ETF) manufacturers through public bidding by October 30, 2019, extension of the term of the present ETF manufacturers (SBI MF and UTI MF) till then, and also authorised the Finance Investment & Audit Committee (FIAC) to conduct the exercise of choosing ETF manufacturers.

Allocation of investment in Nifty 50 and Sensex: The board approved the proposal for the even allocation of funds between Nifty 50 and Sensex ETFs, i.e. in the ratio of 50:50.

Appointment of a consultant in addition to CRISIL Ltd: The board approved the nomination of members from the employer’s and employee’s side in a committee constituted to select and appoint a separate agency/ consultant in addition to CRISIL Ltd, inter-alia, to review the working of portfolio managers (PMs) and assist the investment committee in redemption of ETFs, among others.

Appointment of Portfolio Managers for managing funds of Central Board, EPF: The Board approved a Request for Proposal (RFP) document for appointment of Portfolio Managers and recommendation of the FIAC on appointment of Portfolio Managers.

Exercise of early redemption options available in DHFL bonds: The board approved early redemption option in DHFL bonds, recommended by FIAC.

Consent for Transfer of Non-Convertible Debentures (NCDs) of GSPC to GSIL: EPFO has a total investment of Rs 2,300 crore in GSPC NCDs. The board has approved the transfer of NCDs of GSPC to GSIL, a wholly-owned subsidiary of the Gujarat government and a better rated company, which had made an offer to take over the debt of GSPC with the budgetary support of the Gujarat government.

Withholding Investments in bonds of private sector companies: The CBT has approved the decision to withhold any further investment in private sector companies’ bonds and to compulsorily consider one of the two required ratings necessarily from CRISIL, CARE, ICRA & India Ratings, for investment in the PSU bonds category.

The meeting also saw the launch of the revamped EPFiGMS (EPF Grievance Management System) 2.0 version, which will benefit more than 5 crore subscribers and lakhs of employers by the speedy and smooth resolution of grievances. EPFiGMS is a customised portal of EPFO that aims to redress grievances on services provided by EPFO. Grievances can be lodged at any place and will land in the concerned office to which the grievances pertain. Grievances can be sent to the head office at New Delhi or to 135 field offices across the country.

Published on August 22, 2019

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