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Critical Topics and Their Significance for the UPSC CSE Examination on November 18, 2024

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What are the issues faced by EPFO pensioners?

For Prelims Examination:  Current events of national and international importance

For Mains Examination: GS II - Indian Polity & Governance

Context:

Nearly 78 lakh Provident Fund (PF) pensioners across the country under the Employees’ Pension Scheme, 1995 (EPS-95) of the Employees’ Provident Fund Organisation (EPFO) will receive their pension through any bank, any branch from January 1, 2025. The Union Labour Ministry cleared the proposal earlier this month for a Centralised Pension Payment System (CPPS) as part of the EPFO’s ongoing IT modernisation project, the Centralised IT Enabled System

Read about:

What is a Unified Pension System?

What is Employees’ Provident Fund Organisation (EPFO)?

Key takeaways:

Starting January 1, 2025, nearly 7.8 million Provident Fund (PF) pensioners under the Employees’ Pension Scheme, 1995 (EPS-95) will be able to receive their pensions from any bank branch across the country. This development comes following the Union Labour Ministry's approval earlier this month for a Centralised Pension Payment System (CPPS), part of the EPFO’s broader IT modernization initiative known as the Centralised IT Enabled System.

What prompted this new arrangement?

Currently, pensioners need to transfer their Pension Payment Orders (PPO) when moving to a new location, often leading to complaints about delays and disruptions in payments. Additionally, pensioners can only access their monthly pensions through a limited number of banks approved by the EPFO in each region.

The introduction of CPPS, which has been endorsed by the Union Ministry of Labour and Employment, will facilitate a shift to an Aadhaar-based payment system in the next phase. This will streamline the pension initiation process, eliminating the need for in-branch verification and allowing for immediate crediting of pensions. The EPFO anticipates significant cost savings with this new system.

Will this change benefit pensioners?

While the development is generally welcomed, K.P. Babu, General Secretary of the Chennai EPF Pensioners’ Welfare Association, emphasizes that the practical impact will depend on the implementation details. Many pensioners, like other bank customers, already use ATMs for transactions due to the core banking system.

How has the announcement been received?

Many pensioners are disappointed with the Union Ministry’s decision, as they had hoped for a more favorable outcome, similar to the unified pension scheme offered to government employees, which combines features from both the Old Pension Scheme (OPS) and the New Pension Scheme (NPS).

Trade unions and Members of Parliament across party lines have been advocating for an increase in the minimum pension amount of ₹1,000. Recently, BJP MP Shobhanaben M. Baraiya requested a raise to ₹7,500, including dearness allowance (DA) and medical allowance. Several pensioner associations have called for a minimum of ₹9,000 plus DA, a demand also made by trade unions during pre-Budget consultations with the Union Finance Minister.

What about applications for higher pension based on wages?

PF members and pensioners are growing increasingly concerned about the processing of their applications for pensions based on higher wages. Many had expected higher pensions following the Supreme Court’s November 2022 ruling in favor of pension payments on wages exceeding the PF ceiling. However, as of August 7, 2024, only 8,401 PPOs have been issued, and 89,235 demand notices have been sent for arrears transfer. Out of nearly 17.5 lakh online applications, about 1.5 lakh were rejected.