The Employees Provident Fund Organisation (EPFO) may widen the scope of its pension scheme , bringing to the scheme all employees who are part of both organized and non-organised sectors, regardless of their monthly earnings. This new plan is expected to be based on an individual contributions and will ensure that every employee receives a minimum retirement of 3,000 rupees per month once they reach the age of 60 .
The proposed scheme, likely to be named Universal Pension Scheme (UPS), intends to resolve various challenges the existing Employees’ Pension Scheme (EPS), 1995 suffers from including, no coverage for employees earning above Rs 15,000 a month, a paltry pension amount for the existing subscribers and coverage of left-out section within the organised, unorganised/self-employed workforce.
The new scheme will provide for superannuation, widow’s pension children’s pension, disability pension. However, it would increase the minimum period of eligibility of time for pension benefits to 15 years, up from 10 years now. UPS will offer pension benefits to the family in the event that an individual dies prior to 60 years old.
“The minimum accumulation amount of about. approximately 5.4 lakh is needed to earn the minimum of the amount of Rs 3,000 per month in pension. Members may choose to make more contributions on their own and accumulate a much larger amount to get a higher income,” an ad-hoc committee formed to be appointed by EPFO’s Central Board of Trustees (CBT) EPFO’s top decision-making body, announced.
In the present it is the case that EPF contributions are currently mandatory. EPF contribution is required for those earning less than 15,000 per month in establishments with more than 20 employees. Every employee is required to contribute 12percent of their basic pay into the EPF scheme. The employer matches this contribution. employer.
EPS is required for everyone contributors to EPF. In the case of the employer’s amount, 8.33% is deposited into the pension plan subject to a maximum of Rs. 1,250 per calendar month, based on the salary limit of 15,000 rupees per month. The money is deposited into the pension fund with no interest earned by the subscriber. When a person retires, their pension is paid out on a every month, based on the same formula that is used for everyone.
Under the new proposed scheme, workers in the organised sector will be required to contribute to the scheme in a certain proportion of their wages (so that as wages increase in the future, the amount of money contributed to the fund will increase). Workers in the unorganised sector will be required to contribute a predetermined amount, but they will be able to make voluntary payments. The scheme won’t result in any liability for the government in the future.
If the committee approves of the suggestions of the committee the new policy could include a suggestion to raise the ceiling for wages from to 15,000 rupees per month at present, but “the liability of the employers should be restricted to maximum contributions @wage Rs 25,000 or the revised wage ceiling amount.”
The new system will allow for seamless switching between informal and formal employment seamless and effortless.
“The final form of a pension depends on the results of the fund in its accumulation stage. The committee reviewed that, since the pension funds will be permanently locked into for the long-term it is necessary to use a slightly different approach to investing would be needed in order to follow the same strategy in a fund for provident with an investment horizon significantly smaller,” the EPFO said.