Centre may separate EPF and pension a/cs
NEW DELHI: The government may separate the provident fund and pension accounts of millions of formal sector workers covered by the Employees’ Provident Fund Organisation (EPFO) in order to protect monthly pension payouts.
The move is being seen as a pension reform under the labour code on social security. Authorities believe that once EPFO subscribers have a separate pension account, they won’t withdraw their pension accumulations along with employees’ provident fund (EPF).
When workers withdraw their provident fund, they end up breaking into their pension fund, too, because they are part of a single account at the moment, according to two government officials.
The problem has become acute post the pandemic, with mounting joblessness. A total of 7.63 million employees have dipped into these savings under a clause called Covid advance as of May 31 2021, following the outbreak of the pandemic last year. Since April 1 2020, some 39 million claims, including Covid advances, have been settled by EPFO as of June 19 2021.
Of the cumulative 24% statutory EPFO contributions by both employees and employers every month, 8.33% goes to EPS (employee pension scheme) and the rest to EPF. While withdrawing from EPFO on account of any reason, subscribers often withdraw all their savings, including the pension amount. This, according to the government, defeats the purpose of retirement pension benefit provisions.
“Under EPFO, the PF and pension schemes must have two separate accounts. While there should be no problem in withdrawing the PF corpus when required as per law, the pension account should be ideally kept untouched. This will increase pension earnings and offer better social security coverage,” said one of the two officials who declined to be named.
The official said the matter was discussed at an EPFO board meeting earlier this year after an internal government panel advised the separation of EPF and EPS accounts. The official said if due to any reason a subscriber dips into the pension corpus, “the pension account can show a commuted value”, meaning the post-retirement pension amount may come down.
“Currently, EPFO subscribers are in a pool account system. What is needed is a separate account for EPF and pension. People are demanding more pension and, for that, separation is the best solution,” said Virjesh Upadhyay, a central board member of EPFO.