There is big news for about six crore subscribers of Employees’ Provident Fund Organization (EPFO). The central government is planning to segregate the provident fund (PF) and pension accounts of formal sector employees covered by EPFO to safeguard monthly pension payments. Two top officials have given this information.
According to officials, the government wants to do this because when employees withdraw their provident fund, they also withdraw money from their pension fund, as PF and pension are part of the same account. With the Corona epidemic, the problem of increasing unemployment has become acute.
After the outbreak of the pandemic last year, till 31 May 2021, a total of 70.63 lakh employees have withdrawn money under Kovid Advance. About 3.90 crore claims including COVID advance have been settled by EPFO from 1st April 2020 till 19th June 2021. Out of 24% statutory EPFO contribution every month by both employees and employers, 8.33% goes to EPS (Employees Pension Scheme) and the rest to EPF. While withdrawing from EPFO for any reason, subscribers often withdraw all their savings including pension amount. According to the government, this defeats the purpose of retirement pension benefit provisions. With the separation of EPF and pension account, it will not be possible to withdraw the amount of pension fund.
Discussed in EPFO board meeting
The matter was discussed in the EPFO board meeting earlier this year after an internal government panel advised segregation of EPF and EPS accounts, the official said. Under EPFO, there should be two separate accounts in PF and pension schemes, the official said. While, as per law, there should be no problem in withdrawing PF funds when required, the pension account should ideally be kept untouched. This will increase pension income and offer better social security coverage.
People want more pension
Brijesh Upadhyay, member of the Central Board of EPFO, said, as the second wave of Kovid-19 subsides, more steps will be taken on this front. Presently, EPFO subscribers are in a pool account system. A separate account is needed for EPF and pension. People are wanting more pension and for that the best solution is to separate both the accounts. Once they are separated, a subscriber can contribute more to the pension and become eligible to receive more pension after retirement.
Two types of schemes possible
Upadhyay said there is a possibility of two separate schemes. One for those earning less than the salary limit of Rs 15,000 per month and the other for all customers who are earning more. The government currently contributes 1.16% to the pension of every PF member earning a monthly salary of less than Rs 15,000 as part of the Employees’ Pension Scheme of EPFO. This support to the poor and low-income members will continue even further. However, the whole exercise is to stop the pension withdrawal amount along with PF.