There is a big news that can bring in massive change in the salary of people working in private sector. This news is about their provident fund (PF) as there might be changes in the EPFO structure.
There is a big news that can bring in massive change in the salary of people working in private sector. This news is about their provident fund (PF) as there might be changes in the EPFO structure. Senior officials of Labour Ministry has made some suggestions to cabinet committee on labour in this regard. These officials were of the view that to continue and make EPFO like funds more relevant, there is a need to make structural change in it.
As per Zee news report, In the recommendations given to cabinet committee, it was said that instead of existing system of ‘Defined benefits’, ‘Defined contributions’ model should be initiated. Currently, there is a mnimum limit of EPFO pension has been fixed. This model, in a way, is ‘defined benefits.’ On availing ‘Defined contributions’, members of the EPF will be given benefits as per their contributions. Meaning, your contribute will be directly proportional to your contribution.
As per media repots, EPFO has more 23 lakh pensioners, who get a pension of Rs 1,000 every month. While their contribution in the PF is even less than one fourth of it. The officials said if it continues to happen, it will be difficult to manage in future. This is why ‘Defined contributions’ should be adopted to make it more relevant. In August 2019, EPFO’s Central Board of Trustees (CBT) has demanded to increase minimum pension to Rs 2,000 to RS 3,000 as per pension scheme, however, it was not implemented. As per sources, the government will have to bear an extra expenditure of Rs 4500 crore upon implementing minimum pension of RS 2,000 and if it is increased to Rs 3,000, it will cost the exchequer massive Rs 14,595 crore.
As per officials, a big portion of EPFO amount invested in the share market also gave negative returns due to Covid 19 pandemic. Of the Rs 13.7 crore EPFO corpus, only five per cent or Rs 4600 crore was invested in the share market, said officals to Zee news.
