March 20, 2023

General Studies Paper 2


  • 70 lakh pensioners are still waiting for higher pension under the Employees’ Pension Scheme (EPS), 1995. The Supreme Court reiterated, as a matter of principle, its approval of the idea of higher pension.

Elderly Population:

  • The National Elderly Policy defines people in the 60+ age group as elderly.
  • According to the Population Census 2011, there are nearly 104 million elderly persons in India.

Problems associated with old age:

  • Social: The traditional values and institutions are in the process of erosion and adaptation.
  • Financial: Retirement and dependence of elderly on their child for basic necessity.
  • Health:
    • Multiple disabilities among the elders in old age.
    • Among persons aged 60 and above, 30% to 50% (depending on gender and age group) had symptoms that make them likely to be

Employees’ Pension Scheme (EPS):

  • It is a social security scheme provided by the Employees’ Provident Fund Organisation (EPFO).
  • The scheme was first launched in 1995.
  • It makes provisions for pensions for the employees in the organized sector after the retirement at the age of 58 years.
  • Employees who are members of EPF automatically become members of EPS.
  • Both employer and employee contribute 12% of employee’s monthly salary (basic wages plus dearness allowance) to the Employees’ Provident Fund (EPF) scheme.
  • EPF scheme is mandatory for employees who draw a basic wage of Rs. 15,000 per month.
  • Of the employer’s share of 12 %, 8.33(eight point three three)% is diverted towards the EPS.
  • Central Govt. also contributes 1.16(one point one six)%of employees’ monthly salary.

What is the current Issue?

  • Circular by Employees’ Provident Fund Organisation (EPFO): The circular covers only a segment of pensioners-subject to certain conditions.


  • In 2005: Section of Himachal Pradesh Tourism Development Corporation staff demanded higher pension.
  • The employer had made the 12% mandatory contributions on their actual pay, which exceeded the statutory ceiling
  • entitled to the benefit of the deposit of 8.33(eight point three three)% of their actual salary in the Pension Fund.
  • Employees along with their employer did not exercise their option within the cut-off date.
  • In 2016: Court rejected the EPFO’s notion of a cutoff date.
    • It held that the cut-off date, as in the EPS rules, was meant to calculate the pensionable salary only.

Conditions imposed by circular of EPFO:

  • Payment of contributions on higher or actual wages
  • Exercise of joint option while in service
  • Refusal by the EPFO to allow higher pension.

Reason for reluctance by PF authorities:

  • Apprehension over the sustainability of the pension fund
  • Those receiving lower pension have to cross-subsidise pension payouts for those getting or likely to get a higher pension.
  • Factors such as:
    • rising actuarial shortfall, lower rate of returns and increasing longevity of pensioners may lead to the situation of pension payouts outstripping receipts.
    • According to the EPFO: It will go against social security.

Initiatives by government for elderly:

  • PM Vaya Vandana Yojana
  • Indira Gandhi National Old Age Pension Scheme
  • Rashtriya Vayoshri Yojana
  • Vayoshreshta Samman
  • Varishth Pension Bima Yojana
  • Integrated Programmes for older persons

Way Forward

  • Much of the confusion among pensioners could have been avoided had they been proactive in sharing information or explaining the position to those concerned.
  • On the policy front: The Government and the EPFO should increase the minimum monthly pension of ₹3,000 against the existing ₹1,000.
    • It will address the grievances of pensioners who were in the lower wage bracket.
  • EPFO can give a one-time opportunity to all those in the higher wage group who retired in Dec 2004 without exercising the option.
  • Government should substantially increase its financial support.
  • Code on Social Security, 2020: It can have a scheme for those youngsters who have got jobs after September 2014 who have been left out of the EPS on account of their higher wages.
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