EPFO may replace LIC as fund manager for PM’s pension plan
The government plans to ease eligibility norms to make its pension scheme for unorganised sector workers more inclusive and is considering replacing the fund manager, Life Insurance Corporation of India (LIC), with the Employees’ Provident Fund Organisation (EPFO) to ensure better synergy, officials privy to the proposal said.
The Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), a contributory scheme that offers a pension of ₹3,000 per month to those employed in the unorganised sector, from cobblers to construction workers, excludes those covered by the Employees’ State Insurance Corporation (ESIC) and EPFO. This exclusion criterion appears restrictive, based on a mistaken assumption that workers cannot move from the unorganised sector to the organised sector and vice versa, two officials with direct knowledge of the matter said on condition of anonymity The government is considering relaxing the criterion so that those who enrol in PM-SYM continue to receive its benefits even if they move to a job in the organised sector, the officials said.
The proposed changes are based on feedbacks received by the government. The scheme has become quite popular, attracting around 2.56 million subscribers in less than three weeks after its formal nationwide launch on March 5 by Prime Minister Narendra Modi in Ahmedabad, the officials cited above said. The pension of ₹3,000 per month will start after a worker reaches the age of 60. Those with a maximum monthly income of ₹15,000 can enrol in the scheme. The government is also considering a proposal to enlist EPFO as the administrator of the new pension scheme because the retirement fund manager, with at least 45 million subscribers, has better infrastructure and expertise than LIC in managing the funds, the officials cited above said.
The changes will be effected only after obtaining the approval
of the EC, given that the general election process is underway and the model code of conduct is in place, they said. LIC could not actively participate in the launch of PM-SYM. Given that the scheme has been conceived and launched by the ministry of labour and employment, it will have better synergy with EPFO because the labour minister is also the chairman of its Central Board of Trustees, one of the officials cited above said. The finance ministry is the administrative ministry for LIC. According to the officials, the government realised during the nationwide launch that the EPFO, with over 20,000 staff, was better equipped to handle the scheme compared to the LIC. “In fact, EPFO was roped in for expeditious implementation and it could deliver to the satisfaction of the authorities,” the second official said. Email queries sent to the labour ministry and LIC
did not elicit any response. “The labour minister [Santosh Gangwar] wants that social security benefits of workers must not be discontinued even after they join organised sector and becomes subscribers of ESIC or other schemes. No government scheme should discourage upward mobility of workers,” the second official said. “There is a synergy in managing the funds for both organised and unorganised sector. It would mean economies of scale and consequently better returns for the subscribers; besides it would help EPFO to become one of the largest pension funds of the world,” the first official said. Labour economist Alakh N Sharma,director of the Institute for Human Development, said the scheme could have been “better drafted” and should have been “more inclusive”. The income criterion of up to ₹15,000 appears restrictive, he said.