EPS Will Not Have Deficit, Can be Funded for Decades: Study-Analysis

The viability report of the Employees’ Pension Scheme (EPS) based on the World Bank’s ‘PROST’ model concludes that EPS has no deficit and can be funded for more decades up to 2075. Earlier, the estimates had concluded that out of 1,42,000-crore EPS, had run up to 50,000-crore deficit by 2009-10.

The latest report says that EPS will have positive cash flows even if the wage ceiling for EPF coverage is raised to Rs.7,000 per month this year and increased by 500 every five years. The World Bank has been using ‘PROST’ Model to test pension schemes across the globe.

About 24% of an employee’s salary (up to Rs.6,500 per month) is mandatorily paid to the Employee Provident Fund Organisation (EPFO). Of this, a large chunk of 8.33% is put into EPS to be paid out as pension. The government has taken a move to top up the fund by adding another 1.16% of salary, making the pension pot to 9.49% of the salary.

At present, EPFO covers only 5% of the country’s 400-million odd workforce. The organisation is worried about the pension scheme’s sustainability and has held up plans to expand its remittances to give Provident Fund (PF) cover to all firms with 10 or more employees earning up to 15,000 a month.

Source: Economic times

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