EPFO meet on hiking rates ends in new committee

Trustees of the Employees' Provident Fund Organisation today failed to reach a consensus on raising minimum monthly pension for those under the scheme to Rs1,000, and deferred the issue to its next meeting, even as it formed a committee to study the issue.

"We have decided to form a committee to suggest modalities for implementing the proposal to raise the minimum pension to Rs1,000 a month. The committee will give its report within a month," labour minister Mallikarjun Kharge told reporters after a meeting of the EPFO's Central Board of Trustees (CBT).

The EPFO, or 'PF' scheme as it is popularly known, is a virtually mandatory levy on large employers as well as their employees, aimed at creating a retirement fund for improvident workers. The employer has to contribute about a third of the employee's fund.

The proposal to raise the minimum pension for all subscribers to Rs1,000 will envisage an additional annual outgo of Rs600 crore. Kharge said no decision could be taken immediately on sharing of the burden.

According to the EPFO website, out of the 3.5 million pensioners as of 31 March 2010, as many as 1.4 million persons get a monthly pension of less than Rs500. The number of EPFO pensioners getting Rs1,000 a month is seven lakh. There are cases where pensioners are getting a monthly pension as low as Rs12 to Rs38.

Estimates suggest the proposal to hike the minimum pension to Rs1,000 a month will require an additional contribution of 0.63 per cent of subscribers' basic pay and dearness allowance to the pension account.

The hike in employee contribution will be over and above the 8.33 per cent contributed by employers toward employees' PF account, as well as the 1.16 per cent provided by the government under the scheme.

The meeting failed to reach a consensus because employers and the government were not willing to raise their contribution to the pension kitty and wanted employees to pay more.