Finance Ministry’s proposal to shift EPFO subscribers to NPS
EPFO disagrees with Finance Ministry’s proposal to shift EPFO subscribers to NPS
The Employees’ Provident Fund Organisation (EPFO) says it disagrees with finance ministry’s proposal to encourage its subscribers to shift to New Pension System saying it does not provide better returns than its Employees Pension Scheme-1995.
The retirement fund body has said this in response to a letter written by Financial Services Secretary to Labour Secretary.
“If we take return of EPS as indicative return on the fund managed under EPS then the annualised return for the period May 2009 to May 2013 will be 10.47 per cent, which on the face of it, is higher than the return declared by NPS in its scheme for central government”, EPFO said.
Finance Ministry has written to the Labour Ministry saying: “The subscribers (of EPS) may be given an option to either remain with EPS or join NPS with the same contribution.”
The ministry argued that NPS, which is a self sustaining pension system, could be a good substitute for EPS and would be beneficial for subscribers as they would get decent returns and adequate pension wealth.
Moreover, the Finance Ministry said, “The government would be free from any open ended and financially unsustainable liability of EPS.”
Disagreeing with the contention of the Finance Ministry, EPFO said that EPS scheme provides social security for lower income group people in their old age. In addition, it also provides pension to widow, children and dependents in case of death of the subscriber.
Under the EPS scheme, many interim benefits are provided.
Subscribers can withdraw their contribution towards pension while withdrawing his or her EPF money. There is a lock in period of 15 years in NPS.
Moreover EPS subscribers get bonus of two years on completion of 20 years of service and there is provision of commutation or part withdrawal also. That is not available in NPS.
EPS’s corpus size stood at Rs 1.83 lakh crore as on March 31, 2013. Under the NPS, total corpus was at Rs 29,852 crore as on March 31, 2013 with a subscribers’ base of 47,70,507 members.
EPFO has a subscriber base of over 5 crore and manages PF corpus of Rs 3.7 lakh crore excluding the pension fund of Rs 1.83 lakh crore.
Source : The Hindu