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Govt push for Rs 1000 monthly pension plan by Ashima Gupta
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Govt push for Rs 1000 monthly pension plan |
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Insurance
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The labour ministry has proposed a minimum pension of Rs. 1,000 a month for all those who subscribe to the Employees’ Pension Scheme (EPS). If implemented, the move will benefit nearly 3 million workers engaged in small and medium enterprises with higher retirement benefits. Under the EPS 95 scheme, which has been in operation since 1995, a part of the employees’ provident fund contributions are set aside into a separate corpus which they can claim as pension after retirement, either as a lump sum or as a monthly payment. The amended scheme, for which the labour ministry has moved a cabinet note, would imply that the Centre may have to subsidies the fund through a budgetary grant to raise the pension level for all those who, as per their contributions, are eligible for a much lower payout. Alternatively, it may have to adopt a model of a rolling debt by which it pays new retirees by dipping into the pool of high-income savers who have several years to reach the age of superannuation. About 3.6 million individuals currently draw their pension from this scheme that has a corpus of Rs. 1.95 lakh crore. Of them, 83% or nearly 3 million draw a pension of less than Rs. 1,000. More than a quarter (27%) or 972,000 of the eligible pensioners are engaged in seasonal manufacturing sectors such as bidi-making units, tea gardens, mining and quarrying activities with pension entitlements below Rs. 500 a month. In some cases, the pension entitlements are as low as Rs. 4 per month. “EPS is a contributory fund, and low pensions mean that the monthly contributions by a member to the fund have been extremely low,” a labour ministry official, explaining low-pension entitlements. Click here to know more on pension plan. Dipping into the pool of high-income younger savers to subsidies current low-income retirees, however, carries the risk of creating a fragile financial structure. “If the proposal of a minimum Rs. 1,000 per month sails through, then their monthly pension will have to come from the amounts deposited by other employees,” the official said.
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