15th February 2024 (8 Topics)
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Pension concerns
Context
The recent recommendation of the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) for increase in provident fund (PF) deposits for 2023-24 has not pleased the long-standing demand for an increase in the minimum pension of ?1,000.
EPFO's Provident Fund Rate Recommendation:
- A hike: The Central Board of Trustees of the EPFO has recommended a 0.1-percentage-point increase in PF deposits for 2023-24, aligning with the previous year's decision.
- Concerns for lower hike: However, the proposed rate of 8.25% is 0.4-percentage points lower than in 2018-19, raising concerns among stakeholders.
- Dissatisfaction: Despite the significant transfer of ?1,07,000 crore to EPF members, there is dissatisfaction among those advocating for an increase in the minimum pension of ?1,000.
Government's Response and Budgetary Support:
- Budgetary constraints: The Finance Ministry rejected a proposal to double the minimum pension, citing budgetary constraints due to the substantial rise in the budgetary support needed for the Employees’ Pension Scheme (EPS), 1995.
- Comparison: The projected budgetary support for FY2024-25 stands at ?10,950 crore, reflecting a significant increase compared to the current year's revised estimate of ?9,760 crore.
- Financial implications: The government argues that a 100% rise in the minimum pension would exceed the proportionate increase in overall budgetary support, considering the financial implications for pensioners
Challenges and Potential Solutions:
- Defined Contribution-Defined Benefit: The government defends the EPS as a "Defined Contribution-Defined Benefit" social security scheme, citing an actuarial deficit based on the fund's valuation.
- Contradicting stand: Despite the government's reasons for not hiking the minimum pension, the EPFO's annual report suggests that doubling the minimum pension would not pose a significant financial strain.
- Other issues: Additional issues include equitable distribution of spouse pension and addressing concerns of pre-2014 retirees seeking higher PF pension, highlighting the need for a comprehensive approach to PF pension matters.
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