Finance Ministry rejects proposal to double minimum pension under EPS: Government decision on doubling minimum pension in EPS

Minimum pension amount proposal rejection by Finance Ministry

The proposal put forth by the Labour Ministry to increase the monthly minimum pension amount to Rs 2,000 under the Employee Pension Scheme (EPS) was declined by the union finance ministry

During a meeting on Saturday, the Central Board of Trustees (CBT), the highest-ranking decision-making body of the Employee Provident Fund Organisation (EPFO), was notified of the proposal's denial.

Finance Ministry decision on doubling EPS minimum pension:

"A proposal was submitted to the ministry of finance, in accordance with the recommendations of a government-established monitoring committee endowed with substantial authority, to augment the minimum pension under EPS from Rs 1,000 to Rs 2,000 per month through the provision of supplementary budgetary support. The finance ministry did not agree to it," according to sources with knowledge of the situation.

Impact of Finance Ministry's decision on pensioners:

According to information obtained from the annual report of the social security organization for the fiscal year 2023, out of the 7.55 million pensioners enrolled in the scheme, 1.17 million received a monthly pension ranging from Rs 1,001 to Rs 1,500, while 3.64 million received a monthly pension of up to Rs 1,000. Monthly stipends for approximately 868,000 pensioners ranged from Rs 1,501 to Rs 2,000. A mere 26,769 pensioners earned more than Rs 5,000 monthly. Annually, the pension corpus is assessed in value, and supplementary reliefs are disbursed contingent upon the fund's fiscal standing.

Since 2000, the majority of valuations of the fund have resulted in a deficit, and further assistance could not be rendered. In 2014, however, the Centre increased the minimum pension to Rs 1,000 through budgetary support. "The minimum pension should be increased further in consideration of the widespread demand," a CBT member who was present at the meeting stated.

The EPS 1995 is a self-funded initiative in which the employer contributes 8.33 percent of the monthly wages through the employee's share and the central government contributes 1.16 percent of the monthly wages (with a cap of Rs 15,000 per month). The Labour Ministry was instructed by the Parliamentary Standing Committee on Labour in March 2022 to escalate the issue to the Finance Ministry in order to secure sufficient financial assistance, as the Rs 1,000 monthly pension is deemed "grossly inadequate."

On Saturday morning, the CBT conducted its 235th meeting. It proposed an interest rate of 8.25 percent for FY24, which is the highest in three years, for its more than 290 million total subscribers. Roughly 68 million of these individuals are active contributory subscribers.