Finance Ministry Declines Proposal to Increase Minimum Pension; EPF Interest Rates Hit 3-Year High
MAS Team | 15 February 2024
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The Union Finance Ministry has rejected a proposal from the labor ministry to raise the monthly minimum pension provided by the Employee Pension Scheme (EPS), as per a report by Business Standard. During a meeting with the Central Board of Trustees (CBT) on Saturday, this decision was conveyed.
 
Sources cited by the Business Daily revealed that the labor ministry had forwarded a recommendation to elevate the minimum pension under EPS from Rs1,000 to Rs2,000 per month, based on suggestions from a government-appointed oversight committee. However, the Ministry of Finance opted not to greenlight the proposal.
 
Under the Employees’ Pension Scheme (EPS), 1995, the government has been ensuring a minimum pension of Rs1,000 per month to pensioners since September 1, 2014. This scheme operates under a 'Defined Contribution-Defined Benefit' framework, with contributions from employers at 8.33% of wages and additional contributions from the Central Government, capped at 1.16% of wages up to Rs15,000 per month. All benefits under the scheme are financed through these accumulations.
 
According to the annual report of the Employees’ Provident Fund Organisation (EPFO) for FY23, there are approximately 7.55 million pensioners. Among them, around 3.64 million receive pensions up to Rs1,000 per month, followed by 1.17 million receiving pensions ranging between Rs1,001 and Rs1,500. Additionally, roughly 868,000 pensioners receive pensions between Rs1,501 and Rs2,000 per month. The report also highlights that only 26,769 pensioners receive amounts exceeding Rs5,000 per month.
 
Meanwhile, the EPFO announced a significant hike in the interest rate on employee provident fund to 8.25% for the fiscal year ending March 31, marking the highest rate in three years. This decision was made during the 235th meeting of the Central Board of Trustees (CBT) of EPFO on Saturday, chaired by Union Labour & Employment Minister Bhupender Yadav.
 
Following the CBT's recommendation, the Ministry of Finance is expected to approve the proposed interest rate, after which it will be officially notified in the government gazette. This increase in the interest rate will benefit nearly eight crore contributing subscribers of EPFO, providing them with higher returns on their EPF accumulations for the FY23-24.
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