Retirement fund body EPFO may soon allow its subscribers to contribute voluntarily towards its pension scheme in addition to their employers’ mandatory contributions.
“We are considering a proposal to allow employees to contribute towards ‘EPS 95’ for getting enhanced benefits after retirement.
But that contribution would be paid by the employees,” EPFO’s Central Provident Fund commissioner VP Joy told PTI.
At present, an employer contributes 8.33% of basic wages of Rs 15,000 per month towards to the Employees’ Pension Scheme 1995 (EPS-95).
The threshold for monthly basic wages for deduction of EPS contribution is Rs 15,000. Therefore, the maximum contribution in a pension account can be Rs 1,424 every month which includes government subsidy of 1.16% of basic wages even if an employee is drawing more than the threshold.
Once the proposal is approved by the EPFO’s Central Board of Trustees, the employees would have an option to contribute towards EPS 95 in addition to contributions made by employers.
As per the back of envelop calculations, over three decades of service with average basic wages of Rs 15,000 would result in a pension of not more than Rs 7,500 per month.
Considering the enhanced paying capacity of a large number of subscribers, the EPFO is working on the proposal to allow them to contribute more in addition to employers’ contribution for ensuring higher pension after retirement, an official said.
The official also said, “Since the pension under the EPS 95 scheme is not inflation linked, it remains stagnant after retirement. Thus the employees should have an option to contribute more towards the pension scheme.” The unions have been demanding indexing of pension and a minimum monthly benefit of Rs 3,000 under the scheme. However, government has fixed minimum monthly pension of Rs 1,000 under the scheme.