Decision to Curb Benefits under EPF Pension Scheme Put On Hold
November 11, 2008
Bowing to pressure from all major labour unions, the government on Tuesday decided to put on hold the decision to curb benefits under the EPF pension scheme.
At a meeting of the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO), all the 10 employees' unions unanimously voiced their displeasure against the government's decision to reduce pension benefits in a bid to meet a contingent deficit arising in the pension fund.
The government had earlier taken a decision to curb certain benefits in the scheme in order to enable it to meet a contingent liability deficit (estimated at Rs 42,000 crores) that may arise in the pension fund and released a notification to this effect.
"Currently we had convinced the government to put the implementation of the notification on hold with immediate effect and they have agreed to do so," W R Varadarajan, a CBT member representing CITU, said.
The notification curbed the employees benefits allowed for commutation of the pension (part encashment), allowing employees to draw pension for a period of 20 years only and hike in percent rate of deduction in pension on the event of early retirement.
Earlier, trade unions had said that the government had taken the decision without consulting the Board, solely to address the issue of the contingent liability in the pension fund as was pointed out by the Finance Ministry.
The 10-member representations of the employees at the CBT also agreed that it was "improper" for the government to have implemented the decision without consulting it first.
Speaking on behalf of the 15-member government representation in the board, Ministry of Labour and Employment Secretary Sudha Pillai said it was a matter of internal decision (of the CBT) as to how to address the deficit and the matter can be reviewed.
The minister of Labour and Employment Oscar Fernandes agreed to the demands of the unions to "put on hold" the implementation of the notification in all EPF organisations and said he will take a decision as the Chairman of the CBT about rescinding the order later.
Labour unions had opined that the government may either increase its share of contribution to the pension fund from 1.16 percent presently to 1.5 percent or by seeking more contribution from employers.
All employee unions had unanimously sought a reversal of the government notification on the ground that employees benefit under the pension scheme cannot be curbed.
"The valuation of the deficit was done by the finance ministry in its seventh valuation of the pension fund during 2004. It does not take into account that a large majority of the EPF members exit the scheme even before reaching the age of retirement at 58 years. Therefore, the deficit stated is grossly overvalued," Varadarajan pointed during the meet.
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