Govt plans to offer higher interest for EPFO subsrcibers
In a pre-poll bonanza for private sector employees, the government plans to offer a higher interest on their retirement savings than 8.5 per cent. The government will also clear a long-pending proposal to hike the minimum wage ceiling under the EPFO to Rs 15,000 per month and also pay a fixed monthly pension of Rs 1,000 to subsrcibers to the Employees’ Pension Scheme.
Road transport and highways minister Oscar Fernandes who has been given additional charge of the labour ministry is understood to have agreed to call a meeting of the EPFO’s apex decision making body, the Central Board of Trustees in the second week of January to finalise the package.
“It is the first meeting of the fiscal and a decision on the interest rate must be taken. The rate of return for 2013-14 will certainly not disappoint EPF subscribers,” said a source.
Meanwhile, the decision to increase the minimum wage cap for the EPFO and providing a fixed monthly pension under the related EPS was taken at a meeting by finance minister P Chidambaram on December 16. This will mean the mandatory deduction from the salary of the employees in the private sector towards their EPF contribution will now be applicable for all those who earn up to Rs 15,000 per month. For those earning above this limit their contribution will be limited to Rs 15,000.
The current wage ceiling for EPFO at Rs 6,500 was set over a decade ago in 2001 and has pushed a large number of workers out of an effective provident fund and pension support. For instance, most subscribers get a pension of less than Rs 500 per month despite working for 30 years.
“It was a two-hour long meeting where secretary expenditure, secretary, department of financial services and the labour secretary were present. A proposal has now been worked out,” said an official privy to the development, adding that a formal notification will be issued soon.
Replying to a question in Rajya Sabha on Wednesday, Fernandes confirmed that a proposal for providing a minimum pension of Rs 1,000 per month to pensioners under EPS-95 “was under consideration of the government”.
The hike in the pension and cost of higher interest pay outs would have an impact of about Rs 2,800 crore on the EPS. North Block has opted to give an annual top-up to its subsidy to help finance the Rs 1,000 monthly pension. The labour ministry had earlier suggested increasing the subsidy payout from 0.63 per cent but this was shot down. The current wage limit for mandatory contribution to the EPFO is lower than the minimum wage level in most states.
* Oscar Fernandes, who has been given additional charge of the labour ministry, is understood to have agreed to call a meeting of Central Board of Trustees in of January to finalise the package
* The govt is also likely to hike the minimum wage ceiling to Rs 15,000 per month and also pay a fixed monthly pension of Rs 1,000 to subsrcibers to the Employees’ Pension Scheme