PENSION PROVIDENT FUND - GOVERNMENT SCHEME
News: EPFO marginally hikes interest rate on
deposits to 8.15 %
What's in the news?
● The
Central Board of Trustees of the Employees’ Provident Fund Organization decided
to recommend an increase of 0.05% in the
interest for Provident Fund deposits.
● Members
urged the EPFO to make the process of filing options simpler. They said as most
of the applicants were senior citizens, they should not be asked to run around
and make it a cumbersome process.
Key takeaways:
● The
Centre has been maintaining that the interest
rate of the EPFO is higher than other comparable investment avenues available
for subscribers.
● The
meeting also decided to map a five-year plan on capital expenditure so that by
the end of five years, most of the EPFO offices get their own buildings and
infrastructure. The budget for this is ₹2,000 crore.
Pension Provident Fund Scheme:
● EPF
Pension, which is technically known as Employees’ Pension Scheme (EPS), is a
social security scheme provided by the Employees Provident Fund Organization
(EPFO).
● The
scheme was first launched in 1995.
● The
scheme, provided by EPFO, 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 % is diverted towards the EPS.
○ Central
Govt. also contributes 1.16% of employee’s monthly salary.
Employees Pension (Amendment) scheme 2014:
● The
EPS amendment of 2014, had raised the pensionable
salary cap to Rs 15,000 a month from Rs 6,500 a month, and allowed only
existing members (as on September 1, 2014) along with their employers exercise
the option to contribute 8.33% on their actual salaries (if it exceeded the
cap) towards the pension fund. This was extendable by another six months at the
discretion of the Regional Provident Fund Commissioner.
● The
amendment, however, required such members to contribute an additional 1.16% of their salary exceeding ₹ 15,000 a month towards the
pension fund.