No pension withdrawal before 10 yrs

Facing a Rs 19,291-crore (Rs 192.91 billion) deficit in the Employees Pension Scheme 1995, the government plans to stop members from withdrawing from the scheme until they complete 10 years of service.

Employees who are members for less than 10 years have the option of taking either the withdrawal benefit or a scheme certificate that will allow them to make a withdrawal after attaining 58 years.

Labour Secretary KM Sahni convened a meeting of central trade unions on the issue last week but, officials said, the unions expressed reservation on the proposal.

The EPS, with 47.4 million members, offers pension equivalent to 50 per cent of the last salary drawn to those exiting the scheme on superannuation. A total of 8.33 per cent of the employers' contribution to the provident fund is transferred to the pension fund under EPS.

The government had proposed an amendment to Paragraph 14 of the EPS in order to stop withdrawals for members exiting the scheme before 10 years. The paragraph provides that even if a member has not rendered the eligible service (10 years), he is entitled to a withdrawal benefit.

If a member is exiting at the end of 9 years and his annual contribution to the scheme is Rs 100, the scheme provides for a withdrawal benefit of Rs 40.05. The benefit varies according to the service period.

The Employees Provident Fund Organisation now finds that the percentage of members exiting the scheme before attaining the retirement age of 58 years to the total has fallen to 2.41 per cent in 2003-04 from 4.36 per cent in 1997-98.

At

the time of notification of the scheme, it was expected that more members would opt for the scheme certificate to have continued protection to family and to get pensionary benefits at the entitled age.

It was also assumed that the withdrawal benefit would be limited to the group of people who join EPF-covered employment stream after attaining the age of 48 or person who are migrating out of the country or leaving employment stream for various reasons like marriage, setting up own business, etc.

Explaining the reason for their opposition, Centre of Indian Trade Union secretary WR Varadarajan questioned the "blocking" of the money.

"Why should employees be asked to wait for 58 years? One, they do not get continuity of employment and, second, they may decide to go abroad in which case their money is lost," he said.

EPS net

• The pension scheme has 47.4 mn subscribers
• 8.33% of the employers' contribution to PF is transferred to EPS
• If the amendment goes through, those with less than 10 years' service will be given a scheme certificate that will allow them to make a withdrawal after attaining the age of 58