EPFO proposes new pension scheme; likely to be huge blow for pensioners

NEW DELHI: According to a Right to Information (RTI) document, a proposal for a new pension scheme to replace the existing higher pension scheme is currently before the central government and the Employees' Provident Fund Organisation (EPFO). The report, based on a study conducted by the EPFO, was submitted to the central government in December 2024. The details of the report have now emerged. If implemented, the new scheme is likely to provide lower benefits than the current system.

The report suggests that the scheme could be implemented either with retrospective effect from September 1, 2014, or from the date of official notification. Since the proposal is seen as unfavourable to pensioners, it could trigger large-scale protests. The report also warns that the government may face legal challenges. As a result, neither the central government nor the EPFO has taken a final decision yet.

Key proposals in the new pension scheme

1. Universal Membership: All members will be included in the pension scheme, regardless of salary limits.
2. The employer’s contribution will remain at 8.33%.
3. The central government’s 1.16% contribution will be set aside for minimum pension.
4. The minimum pension may be increased from Rs 1,000 to Rs 3,000, benefiting around 65 lakh pensioners.
5. Contributions within the salary limit will follow a formula similar to the current system.
6. At present, the salary cap is Rs 15,000. Employees may be given the option to contribute on salaries above this limit to the pension fund.

Proposal should be rejected, says N K Premachandran N K Premachandran MP has urged the central government to reject the proposal. In a letter to Union Labour Minister Mansukh Mandaviya, he stated that the move to introduce a new scheme that could reduce pension benefits is unacceptable.

He emphasised that instead of introducing a new scheme that cuts pensions and benefits, the government should revise the existing scheme in consultation with trade unions to make it more beneficial for employees and pensioners.