North India Statesman
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Employees Provident Fund Organization (EPFO) is preparing to make a major change related to the pension of employees. According to media reports, EPFO is preparing a proposal to increase the salary limit from Rs 15,000 to Rs 25,000. If this change is implemented, more than 1 crore employees across the country will come under the ambit of EPS pension. There has been no change in this limit which was increased from Rs 6,500 to Rs 15,000 per month in 2014. There has been no amendment in it since then.
There is a salary limit prescribed under the EPFO Pension Scheme (EPS). Currently this limit is Rs 15,000 per month. This means that whether the salary of an employee is Rs 25,000, Rs 40,000 or more, the pension is calculated on the basis of Rs 15,000 only. Now there is a proposal to increase this limit to Rs 25,000. This will increase the pension base even if the salary is high and the pension amount will also be better in future.
Change is necessary in the old system
At a business event in Mumbai, Department of Financial Services Secretary M. Nagaraju stressed the need for an immediate review. He said it is unfortunate that many people earning more than Rs 15,000 per year are not eligible for pension and have to depend on their children in old age. He said that the old limits need to be changed as they do not reflect the income situation in India today.
Under the current rules, only employees with basic salary up to Rs 15,000 are eligible for EPF and EPS coverage. People who earn a little more can opt out, and there is no pressure on companies to hire them. This leaves many private sector employees in cities unable to build any solid retirement savings, despite low salaries.
New changes in EPS
Many important changes have been made in the Employee Pension Scheme (EPS) with the aim of increasing long-term security of employees and strengthening the pension system. The most important change is that the waiting period for EPS withdrawal has been increased from two months to 36 months. This means that now employees will be able to withdraw their EPS amount only after being unemployed or out of job for three years.
The move is aimed at curbing premature withdrawals and encouraging people to stay invested for a longer period, thereby ensuring a lifelong pension. Another important thing is that the government is reevaluating the minimum pension limit of Rs 1,000 per month. There has been no change in it for the last 11 years. The increase has been recommended by the Parliamentary Committee on Labour, and is expected to be announced soon. This will provide relief to those pensioners who are already facing the brunt of rising inflation.
