EPS (Employees’ Pension Scheme) in India is one of its kind pension schemes in the entire world which has provisions for both contributions as well as benefits. It was launched in 1995 by the then Indian government in order to increase benefits for the working class.
The Employees’ Pension Scheme offered by Provident Fund Department is an excellent provision for working employees and there are numerous benefits attached to it. In its move to update with rising salary of employees across sectors and regions, government has raised the bar for contributions to EPS.
The move comes in anticipation that those drawing high salaries would not be able to abuse the advantages of such schemes, which has a lot of backing and subsidy from the central government. The change welcomes government’s efforts to enable the common man reap benefits and lower the rich-poor disparity.
Finance Ministry has ordered a valuation from the scratch to know the impact of raise in the salary limits on contributions to Provident Funds and thereby come up with better benefit schemes for the actual needy lot.
The Provident Fund department claims to have around 8.5 crore contributing employees from the formal sector, where in they contribute around 24 per cent of their salary to retirement schemes and pension schemes through EPS on a monthly basis.
The pension scheme currently is around Rs. 2 lakh crore and there is an addition of around Rs. 1,200 crore every year, which comes from 1.16 per cent of the salary ceiling of each scheme member. That’s a huge amount put together. As per the new government rulings, every employee would be eligible for a monthly pension of as low as Rs. 1,000; however there are some strict norms attached to the conditions guiding this contribution.
The pension scheme has a unique feature of offering a pension which is interrelated to the salary that is paid to the employee in his/her last 12 months of service. The government has restricted the membership for pension scheme to only those employees whose salaries were either less than or equal to Rs 15,000 at the time of their joining.
This prohibits high income groups from availing the facility that is more focused towards low or medium income groups. Taking it ahead, government has also fixed a limit of contribution to just 8.33 per cent of Rs 15,000, even in case of the employees’ salary moving ahead of the Rs 15,000 bar. That means, an employee can ideally not contribute more than Rs 1,250 a month.
The approval for minimum pension scheme of Rs 1,000 came in early 2014 when government came up with this provision to benefit around 28 lakh pensioners. The new ruling is just a strict insurance to the milder approach that previous governments have been taking towards EPF.
The new approach applied by the government would fall a little heavy on people when their salaries and income gets rising. Last but not the least; it would certainly be a welcome policy for people who fall in low income groups.