Minimum Monthly Pension Plan approved by Finance Ministry
The Finance Ministry has approved a proposal for providing a minimum monthly pension of Rs 1,000/-(Rupees one thousand only) to workers in the organised sector under the Employees’ Pension Scheme 1995 (“EPS-95”) run by The Employee Provident Fund Organisation (EPFO).1 The proposal by the Labour Ministry had been pending for long and was finally approved by the Ministry on 23rd January, 2014.
The Central Government formulated an Employees’ Pension Scheme, 1995 in exercise of the powers conferred by Section 6A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952),. The Employee Pension Scheme is a publicly managed scheme carved with the objective to pay the workers’ defined benefits on their retirement.
In order to facilitate the implementation of the monthly pension plan the government will provide an additional subsidy of Rs. 1,217 crore starting 2014-15. Hence the pensioners may get the benefit of the said plan with effect from April, 2014.
Prior to this plan the Labour Ministry had proposed to the government that the government should increase subsidy for the Employee Pensions Scheme from 1.16% of basic wage to 1.79% in order to ensure the minimum pension. However, the said plan was not favoured by the Finance Ministry as this would have resulted in a permanent increase in subsidy.
The Labour Ministry in its revised proposal had asked the Finance Ministry to provide for around Rs 1,217 crore additional amount every year, and indicated that this amount can come down over a period of time with more members subscribing to EPS-95. The said proposal finally got approved by the Finance Ministry as minimum monthly pension plan.
However, the Labour Ministry is yet to decide whether this proposal requires the approval of the Cabinet.
1 The EPS and EPF Scheme under the EPFO is mandatory for private firms with over 20 employees. This is a blend of a defined contribution (DC) system called the Employee Provident Fund (EPF), and a defined benefit (DB) system called the Employee Pension Scheme (EPS)