The Centre is looking at comprehensive changes in its social security schemes under the Employees’ Provident Fund Organisation that could enable subscribers to contribute for higher pension. Additionally, it is also working on a revamp of the IT systems of the EPFO for a more seamless and efficient services to subscribers and easier withdrawals.
According to official sources, the labour ministry is looking at a significant revamp of the Employees’ Pension Scheme to enable subscribers to contribute on their actual wages and enable them to draw a significantly higher pension at the time of retirement.
“At present, most subscribers end up getting Rs 3,000 to Rs 4,000 monthly pension under the EPS, which is not adequate in any way. The plan that is being considered would enable them to contribute as much of their salary as they wish to for the EPS and subsequently get a much higher pension at the time of retirement,” noted the source, adding that this would enable the government in its efforts to give a universal pension and provide much more social security to informal sector workers, who often have not been able to build a sufficient corpus for retirement.
Employers and employees are mandated to contribute 12% each of an employee’s basic pay into the EPFO. Of the employer’s contribution, 8.33% is diverted into the EPS, 1995. A contribution of 1.16% of the monthly wages (limited to the amount payable on pay of Rs 15,000 only) is also paid by the Central Government.
“The EPS has been giving a return of close to 8% over the years and subscribers will be able to earn a handsome amount on their retirement savings,” the source noted. However, the plan is still at a very initial phase and needs to be fully worked out over the next few months.
As part of the plan, the labour ministry also intends to include gig and platform workers under the ambit of the EPS. Employers would be expected to contribute of 1% to 2% of the gig worker’s monthly earnings to the EPS. The labour ministry is awaiting a report from a committee set up on this issue, which is likely to be submitted in December, before taking forward this plan.
EPFO revamp:
Meanwhile, the labour ministry is also undertaking an overhaul of the EPFO’s IT system to improve its efficiency and allow subscribers to undertake transactions more seamlessly. The revamp is being done in two parts, sources said. Under the first phase- EPFO 2.0, which will be completed by December this year, the government is trying to resolve atleast 50% of the problems being faced.
Under EPFO 3.0, which would be completed by June 2025, a more comprehensive revamp of the IT system and solutions of the retirement fund manager to bring it up to international standards. As part of this plan, the government is also looking at the possibility of providing ATM cards to subscribers, using which they would be able to withdraw upto 50% of their PF contribution without any curbs.
