Editorial Analysis (2nd Jan): Old Age Pensioners and Their Issues

Context: The Employees’ Provident Fund Organisation (EPFO)’s recent clarification on the implementation of the 2022 Supreme Court verdict on higher Provident Fund (PF) pension seems to have added to the woes of pensioners and PF members.

Issues due to the lack of clear guidelines on determining pensionable service and salary

• Pension Calculation Confusion: The recent clarification on pension computation, led to confusion among pensioners
• Impact of Commencement Date: Pensioners who retired before 2014 and opted for pension after the amendments receive lower pensions, calculated based on the average pay of the last 60 months, instead of the previous 12 months.
• Lack of Clear Illustrations: The explanations provided in the clarification are not comprehensive enough to cover all aspects of pension computation, leading to confusion among post-2014 retirees.
• Interest Rate Component: There is a demand for including the interest rate component in the pension calculation. Incorporating this could potentially increase the pension amount.
• Issues with Widow/Widower Pension: The rationale behind halving the pension amount for widow or widower pensions is not clear and is a point of contention.
• Demand for Increased Minimum Pension: There has been a longstanding demand to increase the minimum monthly pension from the current ₹1,000 to at least ₹3,000. This demand includes linking the pension to the cost of living index.
• Feasibility of Pension Enhancement: In March 2022, the government stated that increasing the pension in line with the cost of living index is not feasible due to actuarial concerns.
• Government Contributions and Budgetary Support: The government’s current contributions are in two forms:
  • a subsidy for contribution towards EPS and
  • additional support to ensure the payment of the minimum monthly pension.
  • There is a call for increasing the government’s budgetary allocation to strengthen the social security system.

We’re now on WhatsApp. Click to Join

Conclusion

The concerns about the depletion of the EPS Pension Fund seem unwarranted, given its substantial growth. The fund’s total corpus increased significantly from ₹3.94 lakh crore in 2017-18 to ₹7.8 lakh crore in 2022-23, with annual contributions also rising. This improvement is largely due to increased membership and wage growth. Furthermore, the EPFO’s investments in exchange-traded funds are likely yielding considerable returns, reinforcing the fund’s financial stability and ensuring secure retirement benefits for its members.

Sharing is caring!