Dr P S M Rao

In a note circulated in the 237th Board of Trustees of EPFO meeting held recently in Delhi, the EPFO said it would require Rs.1,86,920 crore to allow a higher pension even to half the applicants. Thus, the concern is more on financial burden although it is the committed obligation of the EPFO to allow the higher pension.

The long wait and distress of the seniors for higher pension, EPF pension on full salary to the eligible in terms of the honourable Supreme Court’s judgment in November 2022, seems not going to end anytime soon. So, is the despair of those hapless pensioners looking for a raise in the minimum pension. The recent moves of the authorities seem to focus more on how to evade these benefits than on how to allow them.

The EPFO in all, received 17.49 lac applications for higher pension. It rejected 5.05 lac applications. Employers have not forwarded 2.24 lac applications. The EPFO has referred back to them 3.92 lac. EPFO says at present it is examining 1.92 lac applications and sent demand notices to another 2.19 lac. So far 74,811 applicants have deposited the additional sum. Media reports say that the EPFO has issued 21,885 pension payment orders in over two years. At that rate, how many years will it take to pay the full pension 100%? The EPFO and the Union government alone should know the answer.

It says the process is on, but its figures show that the eligible are unlikely to get the higher pension shortly, although it is already 27 months since the Supreme Court issued its orders.

History

The employees' pension scheme was added in 1995 with a modest pension benefit engineered through a ceiling on pensionable salary. It was Rs.5,000 when the pension scheme came into force and remained till 2001 when it was hiked to Rs.6,500 and to Rs,15,000 from September 2014. These were the sums on which the PF contributions were made and the pension calculated.

For instance, a person who has completed the full pensionable service, say, 35 years, and had paid during the service time the requisite contribution together with her or his employer on the statutory wages of Rs.5,000 would get the pension of Rs. 2,500 as per the pension formula:

A quick recap of the higher pension background will be in order here. The Employees Provident Fund, the Old Age Social Security Scheme for providing provident fund to workers in factories and other establishments, was introduced in 1951 through a presidential ordinance which was later converted into a central enactment in 1952.

Pension= Pensionable Service X Pensionable Salary

The pensionable salary means the salary on which the contribution is paid, not the actual salary. It is up to the statutory ceiling (Rs.5,000 later enhanced to Rs 6,500 and then to Rs.15,000. This, the ceiling, is exactly the reason why those with high salaries, even with more than lakh rupees, get paltry pension sums of around Rs1,500 a month.

In response, a large number of employees and employers made higher contributions to receive higher pensions. But that was denied when it became due on the ground that they did not file their options for a higher pension although they had paid extra money. This led to the employees waging a long legal battle in different high courts, Delhi, Rajasthan Kerala, etc. and finally to the Supreme Court. The three-judge bench of the Supreme Court gave its judgment on 4 November 2022.

Since the pension sum was too insignificant, disproportionately lower than the last drawn salary, the government brought a change effective 16 March 1996, allowing, at the option of the employees and employers, the EPF contribution on the actual salary above the ceiling which facilitated the higher pension proportionate to actual salary instead of ceiling amounts.

Impractical Conditions

All this suggests that the government has found the higher pension scheme not feasible and wants to minimize the burden to the extent possible and that could be the reason why it has highlighted the financial burden on it and the actuarial evaluations now. The higher pension scheme has been totally withdrawn for the employees recruited after September 2014 whereas there is every scope to give full pension equal to half their last drawn salary through appropriate contributions from the employers and the government.

Unfortunately, the ordeal of the senior citizens continues with the impractical eligibility conditions of the government. Paying the higher contributions alone is not sufficient for EPF Organization but it should be backed by the exercise of the option for a higher pension within the timeframe and in the style it wanted; the very payment of higher sums itself is not accepted as proof enough for the employee’s intent for higher pension. There are several other complex conditions for claiming the higher pension benefit. While the Supreme Court gave its verdict on 4 November 2022 its implementation still continues and has been tardy; just 1.25% of the applicants have received the benefit so far.

Minimum Story

The two Telugu states are giving old age pensions, etc, not only more than many other states but several times more than the EPF pension. For instance, it is Rs. 4,000 to the old aged and Rs. 6,000 to the physically challenged. These are obviously without any contributions from the pensioners or any fund like EPF. The actuarial calculations and the government’s inability claims of not raising the EPF pension do not match the facts and the figures of the EPFO.

As lakhs of people were getting small amounts of pension, the government after much clamour from the pensioners, set a minimum pension of Rs. 1,000 a month from 2014. Due to several nuances, many are getting not even that minimum of Rs.1,000. As per the EPFO’s latest available annual report (2022-23), there are 75.59 lakh EPF pensioners in the country. Of them, 48% that is, 36.48 lac get Rs.1,000 less, and 75% get less than Rs.2,000. It is so unfortunate that the majority of EPF pensioners, that means the employees who had contributed to the economic development of the country through their labour and participated in the contributory pension scheme – foregoing money from their PF account - get during their retired life much less than the destitute pensions given by many state governments in the country.

EPF Pension

The recent CBT meeting of the EPFO discussed, as it did earlier, raising the minimum pension, but no convincing and conclusive decision has been taken by the government to raise it and raise it adequately. Earlier, several committees have recommended hiking the minimum. Even the labour ministry made a futile attempt to convince the finance ministry to raise the minimum pension to at least Rs.2,000, which, too, would be an eyewash given the current inflation and the plight of the retirees.

The corpus of the pension fund is a hefty Rs. 7.80 lac crore (2022-23). Interest earning in a year was Rs 51.98 thousand crore and annual pension contributions Rs.64.88 thousand crore whereas pension payment was just Rs. 14.44 thousand crore which is equal to 27.78% of the interest, or 22% of one year’s contribution or just 1.85% of the corpus. So, where is the dearth of funds? Even if it ever occurs, notionally or actuarial calculation-wise, will it not be the responsibility of the government, in a welfare state, to come to the rescue of the provident fund organization to ensure the uninterrupted payment of the pension and provident fund to the employees?

So, the pensioners have a need. The minimum should be hiked adequately; higher pension should be allowed to the eligible as per the Supreme Court’s directive, and the employees' pension scheme should be reworked and reformed in such a way as to give half the last drawn salary as pension to all the employees in future. Ensuring a dignified life with a decent pension for senior citizens is the inalienable duty of democratic governments. All these are possible and will not place any significant burden on the government; the dearth is not of money but of the government’s will.

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