After 15 years, on the recommendation of the Central Board of Trustees (EPFO), the Government of India accepted one of the long-stagnant demands of the workers to allow restoration of the commuted value of pensions. This is a historical step for the benefit of pensioners under EPS-95. Earlier there was no provision for the restoration of the commuted pension and the pensioner continued to receive reduced pension on account of commutation lifelong.
In the midst of the chaos of COVID-19, there is some relief for the pensioner! The Employee’s Provident Fund Organisation released Rs 868 crore pension along with Rs 105 crore arrear on an account of the restoration of the commuted value of the pension. This move will benefit over 65 lakhs EPFO pensioners who are catered through EPFO’s 135 regional offices. EPFO officers and staff processed pension payment for May 2020 despite the Covid-19 crisis to ensure credit of pension in the bank account of pensioners is on schedule.
The news of the restoration was notified by the government back in February. Commutation is defined as giving up part or all of the pension payable from retirement in exchange for an immediate lump sum. A commutation is an option given to EPFO pensioners to convert a part of their monthly pension into an upfront lump sum payment at the time of retirement. As per EPS rules, an EPFO member who retired before September 26, 2008, could get a maximum one-third of their pension as a lump sum while the remaining two-thirds were paid out as monthly pension during their lifetime.
However, the Central Board of Trustee had a meeting on August 21 last year where they approved the proposal to restore the full monthly pension of those who retired prior to September 26, 2008, and had opted for the pension commutation, after 15 years.
EPF contribution cut impact of pension:
In the EPF 1995 scheme, an employee does not contribute directly. While 12 percent of the employees’ basic salary goes directly towards EPF, 8.33 percent of the employer’s share (out of 12% of the employer share) goes into the employee’s EPF 95. The amount that goes into EPF 95 is capped at Rs 1250 a month as the pensionable salary is also capped at Rs 15,000 a month.
An employee can withdraw the amount that was diverted to EPS anytime on leaving the job but only before completion of 10 years. Else, the employee gets a lifetime pension only if he or she is a member of EPF 95 for at least 10 continuous years of service. From the age of 58, the pensioner starts getting pension after submitting Form 10-D to the Employee’s Provident Fund Organisation (EPFO).