Calcutta, Aug. 27: Employees will have to wait longer for retirement benefits under the provident fund scheme, if the government clears a proposal to raise the eligibility age.
The Employees’ Provident Fund Organisation has drawn up a plan to increase the “vesting age” for its pension scheme from 58 years to 60.
Vesting age refers to the threshold at which retirement benefits start flowing to the employee-contributor.
At present, even employees who retire at 60 are eligible for pension from the provident fund when they turn 58. If the new proposal is approved, the pension will be paid only after the employee-contributor turns 60.
“The government and the trustees are very serious about the issue and a decision is likely to be taken at the next board meeting,” A. Viswanathan, the central commissioner of the Employees’ Provident Fund Organisation, said today.
The proposal has been mooted as a solution to the yawning “actuarial deficit” in the Employees’ Pension Scheme. Actuarial deficit means the shortfall between the pension liability of the Employees’ Provident Fund Organisation and funds available.
The deficit for the pension scheme now stands at over Rs 20,000 crore. “If the vesting age is raised to 60 years, the deficit will straightaway come down to below Rs 10,000 crore,” Viswanathan said.
The state-run employees’ provident fund scheme, which has a subscriber base of over 4 crores, has three components — provident fund, pension and insurance.
Under the provident fund scheme, the employee contributes 12 per cent of the basic salary to the fund with a matching amount from the employer. From the employer’s 12 per cent, a little over 3.6 per cent goes to the pension scheme.
When an employee retires or stops working, the entire provident fund amount can be withdrawn. However, if the employee has subscribed to the scheme for at least 10 years, the person can receive monthly pension from age 58.
Sources said the government is also exploring options to prevent the blanket withdrawal of the provident fund amount. The government wants to allow such withdrawals only when the subscriber turns 60 so that the fund can avert unforeseen outgo and manage its money better.
The management of provident fund resources has become a hotly debated political issue with a section of the government keen on allowing the fund to play the stock market and increase returns. But the Left has opposed such reforms.
Political intervention to keep the interest above market rates has also bled the fund heavily, forcing it to dip into reserves.
Viswanathan said a year from now, employee-contributors would be able to see their provident fund balance online. “We have initiated a process to revive unique identification numbers and photo identity cards for employees.”
The commissioner was here today to receive an XLRI report on the fund’s human resources.
The XLRI report suggested a four-tier structure instead of the five-tier system now. “We have suggested the scrapping of district offices and sub-regional offices of EPFO and replacing the two with branch offices,” said XLRI professor E.M. Rao, the project coordinator.
XLRI has also suggested some changes in the positions and scale of pay for officers and employees of EPFO.