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15th February 2024 (8 Topics)

Pension concerns


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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