The government of India had issued a Gazette notification (GSR Nos. 688 (E) dated September 26, 2008) incorporating several amendments they are:
1. Amendment to Para 12 (7).
2. Deletion of Para 12 A.
3. Deletion of Para 13.
These amendments have far reaching consequences by way of substantially altering the benefit package of the EPS ’95 to the detriment of the interests of workers.
The first amendment to Para 12 (7) has increased the rate by which the amount of pension is to be reduced in the case of early pension (availed by those who have completed 50 years of age but are below the age of 58) from 3 per cent to 4 per cent. This will result in immediate reduction in the quantum of pension.
If, for example, the eligible pension on completing 58 years of age is Rs 1000 per month and the employee has to exit the job on completion of 50 years of age, either due to resignation, retrenchment, illness or otherwise, he would get an early pension applying a reduction of 3 per cent per year i.e. 24 per cent reduced from the monthly pension and would get Rs 760 per month. This reduction rate has now been enhanced to 4 per cent and in this case the reduction would be 32 per cent or the monthly pension would be Rs 680 only.
The second amendment (deletion of Para 12 A) is altogether eliminating the option available at present for commutation of pension. The existing provision enables a member to commute up to a maximum of one-third of his pension so as to receive hundred times the monthly pension. This facility was made available after three years of commencement of the Pension Scheme i.e. from November 16, 1998 onwards.
If, for example, the eligible pension is Rs 1000 per month and the pensioner opts to commute one-third of his monthly pension the commuted value will be equal to 1/3 x 1000 x 100 = Rs 33,333 and the same will be paid at the time of exercise of option for commutation. The balance pension payable on monthly basis will be Rs 667.
This option for commutation stands totally abolished now with this amendment. The pensioner is thus denied the opportunity to commute one-third of his monthly pension and avail a lump sum amount to meet exigencies like marriage in the family, death of kin, medical expenses etc. The concept of commutation is a universal component of any pension scheme and this has been done away with arbitrarily.
The third amendment (deletion of Para 13) eliminates the existing option available to a member eligible for pension to draw reduced pension and avail a return of capital under any of the three alternatives provided. Unlike the option for commutation, the option for return of capital must be exercised at the time of applying for pension itself.
The three alternatives available were:
i. A pensioner during his lifetime can opt to avail a revised pension of 90 per cent of original pension with return of capital equal to 100 times the original monthly pension payable to the nominee on death of the member.
ii. A pensioner during his lifetime can opt to avail a revised pension of 90 per cent of original monthly pension; the widow of the pensioner can opt to avail a revised pension of 80 per cent of original monthly pension on the death of her husband; the nominee of the pensioner can also exercise this option on the remarriage of the widow; In these case the return of capital will be equal to 90 times the original monthly pension.
iii. A pensioner can opt to avail a fixed pension for a period of 20 years notwithstanding whether the member lives for that period or not. Under this option the member can avail a 87.5 per cent of original monthly pension for 20 years and at the end of 20 years, avail return of capital equal to 100 times the original monthly pension.
All these three alternative options for availing return of capital have now been totally eliminated with these amendments.
Pkjain
From India, Delhi
781. Amendment to Para 12 (7).
2. Deletion of Para 12 A.
3. Deletion of Para 13.
These amendments have far reaching consequences by way of substantially altering the benefit package of the EPS ’95 to the detriment of the interests of workers.
The first amendment to Para 12 (7) has increased the rate by which the amount of pension is to be reduced in the case of early pension (availed by those who have completed 50 years of age but are below the age of 58) from 3 per cent to 4 per cent. This will result in immediate reduction in the quantum of pension.
If, for example, the eligible pension on completing 58 years of age is Rs 1000 per month and the employee has to exit the job on completion of 50 years of age, either due to resignation, retrenchment, illness or otherwise, he would get an early pension applying a reduction of 3 per cent per year i.e. 24 per cent reduced from the monthly pension and would get Rs 760 per month. This reduction rate has now been enhanced to 4 per cent and in this case the reduction would be 32 per cent or the monthly pension would be Rs 680 only.
The second amendment (deletion of Para 12 A) is altogether eliminating the option available at present for commutation of pension. The existing provision enables a member to commute up to a maximum of one-third of his pension so as to receive hundred times the monthly pension. This facility was made available after three years of commencement of the Pension Scheme i.e. from November 16, 1998 onwards.
If, for example, the eligible pension is Rs 1000 per month and the pensioner opts to commute one-third of his monthly pension the commuted value will be equal to 1/3 x 1000 x 100 = Rs 33,333 and the same will be paid at the time of exercise of option for commutation. The balance pension payable on monthly basis will be Rs 667.
This option for commutation stands totally abolished now with this amendment. The pensioner is thus denied the opportunity to commute one-third of his monthly pension and avail a lump sum amount to meet exigencies like marriage in the family, death of kin, medical expenses etc. The concept of commutation is a universal component of any pension scheme and this has been done away with arbitrarily.
The third amendment (deletion of Para 13) eliminates the existing option available to a member eligible for pension to draw reduced pension and avail a return of capital under any of the three alternatives provided. Unlike the option for commutation, the option for return of capital must be exercised at the time of applying for pension itself.
The three alternatives available were:
i. A pensioner during his lifetime can opt to avail a revised pension of 90 per cent of original pension with return of capital equal to 100 times the original monthly pension payable to the nominee on death of the member.
ii. A pensioner during his lifetime can opt to avail a revised pension of 90 per cent of original monthly pension; the widow of the pensioner can opt to avail a revised pension of 80 per cent of original monthly pension on the death of her husband; the nominee of the pensioner can also exercise this option on the remarriage of the widow; In these case the return of capital will be equal to 90 times the original monthly pension.
iii. A pensioner can opt to avail a fixed pension for a period of 20 years notwithstanding whether the member lives for that period or not. Under this option the member can avail a 87.5 per cent of original monthly pension for 20 years and at the end of 20 years, avail return of capital equal to 100 times the original monthly pension.
All these three alternative options for availing return of capital have now been totally eliminated with these amendments.
Pkjain
From India, Delhi
Dear Shri. Pkjain, Wish you happy Dipawali and prosperous new year. Thank you very much for your prompt sharing elaborately. With regards. Keshav Korgaonkar
From India, Mumbai
From India, Mumbai
Dear PKJain,
Thank you for educating the EPF community on the above provisions.
The reduction on pension before attaining 58 years' age as 4% each not a flat rate as stated above. To get the factor kindly arrive the power (1to8) of 0.96. For e.g. if the claim is at 50 years, the factor will be 0.96's 8th powe, i.e. 0.7214 or 72.14%, not 68%.
Abbas.P.S
From India, Bangalore
Thank you for educating the EPF community on the above provisions.
The reduction on pension before attaining 58 years' age as 4% each not a flat rate as stated above. To get the factor kindly arrive the power (1to8) of 0.96. For e.g. if the claim is at 50 years, the factor will be 0.96's 8th powe, i.e. 0.7214 or 72.14%, not 68%.
Abbas.P.S
From India, Bangalore
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