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Source: The post is based on the article “Pension scheme: Why the EPF Federation has concerns over the Supreme Court’s ruling” published in the Indian Express on 3rd November 2022.
What is the News?
The Employees’ Provident Fund Organisation (EPFO) is yet to issue any guidelines after the Supreme Court’s judgment on higher pensions.
About the SC’s judgment on EPFO pension scheme and the Employees’ Pension Scheme (EPS), 1995
The SC allowed another opportunity to EPFO members who have availed of the Employees’ Pension Scheme (EPS), to opt for higher annuity over the next four months.
| Read more: All employees can opt for EPFO pension scheme: Supreme Court |
About the 2014 amendment to EPS
It introduced mainly three changes a) It allowed members along with their employers to contribute 8.33 per cent on their actual salaries, b) It raised the pensionable salary cap to Rs 15,000 a month from Rs 6,500 a month, and c) It allowed members to contribute an additional 1.16% of their salary exceeding Rs 15,000 a month towards the pension fund.
The government gave all EPS members six months to opt for the amended scheme. If members, not opted for the scheme, then the extra contributions already made to the pension fund were to be diverted to the Provident Fund account of the member, along with interest.
What will be the impact of SC judgment?
Impact on EPF members and employers: a) Higher annuity for EPF members after retirement, b) In times of higher inflation and actual salaries having risen way beyond the pensionable salary cap of Rs 15,000. This would provide a better social security cover for workers after retirement.
Impact on EPFO: As per the amendment, existing members had to contribute the additional 1.16% if they opted for pension linked to actual salaries. So, the EPFO will have to find ways to fund this additional contribution.
What can be done by the government?
The government have to rework the contribution distribution between provident fund and pension. Till the time of legislative amendment, the administrators of the fund have to operate the pension fund for the opting members using any existing corpus.
