New Delhi: Employees provident fund organisation (EPFO) is considering launching a new pension product for organised sector workers earning more than ₹15,000 per month who are not covered by the EPFO's employees' pension plan of 1995 (EPS-95).
At the moment, EPS-95 applies to all employees in the organised sector whose basic wage (basic pay plus dearness allowance) is up to ₹15,000 per month at the time of commencing service.
"There has been demand for higher pension on higher contributions among the members of the Employees' Provident Fund Organisation (EPFO). Thus, it is under active consideration to bring out a new pension product or scheme for those whose monthly basic wages are more than ₹ 15,000," a source privy to the development said.
According to a source, the proposal for this new pension plan may be discussed at EPFO's ultimate decision-making body, the Central Board of Trustees (CBT), meeting on March 11 and 12 in Guwahati.
A sub-committee formed by the CBT on pension-related problems in November 2021 will also provide its report during the meeting.
According to the source, EPFO subscribers earning more than ₹15,000 monthly basic earnings are required to contribute less (at the rate of 8.33 per cent of ₹15,000 monthly basic wages into EPS-95) and hence receive a smaller pension.
In 2014, the EPFO changed the system to cap monthly pensionable basic wages at ₹15,000 per month.
The ₹15,000 limit only applies at the time of enlistment. It was raised from ₹6,500 on September 1, 2014, due to pricing and wage increases in the formal sector.
Later, there were demands and discussions on raising the monthly minimum wage to ₹25,000, but the proposal was rejected.
According to industry estimates, increasing pensionable salary might have brought 50 lakh more workers into the EPS-95 net.
According to the source, a new pension product is needed for people who are either forced to contribute less or who were unable to join the scheme because their monthly basic wages were greater than ₹15,000 at the time of starting service.
According to the source, the EPFO has no plans to raise the pensionable income cap soon, and in that case, the body will have to consider providing coverage to those formal sector workers who are excluded from the EPS-95 due to higher basic pay.
The Supreme Court is also hearing arguments on the pensionable salary cap. The Kerala High Court decided in 2014 that employees might contribute to the EPS-95 based on their actual basic wages.
The EPFO had filed a special leave plea against the Kerala High Court judgement, which was denied by the Supreme Court in April 2019. The Supreme Court recalled the dismissing order in EPFO's review petitions in January 2021.
The Supreme Court barred the high courts of Kerala, Delhi, and Rajasthan from bringing contempt proceedings against the Centre and EPFO for failing to implement their rulings in February 2021.