NEW DELHI: Top labour ministry officials on Thursday told a parliamentary panel on labour that for pension fund like the EPFO to remain viable, it must move from the prevailing system of “defined benefits” to a system of “defined contributions”, where members draw benefits commensurate with their contributions.
Sources said officials told the panel that EPFO had over 23 lakh pensioners drawing Rs 1,000 per month even when their contributions to the fund corpus had been less than a fourth of the benefits they were drawing. They also said this would be unviable for the government to support in the long run, unless a system of “defined contributions” was put in place.
Last year, the committee had questioned labour ministry on its failure to implement an August 2019 recommendation of the central board of trustees of EPFO to raise minimum monthly pension under the EPF Pension Scheme to Rs 2,000 or Rs 3,000. Sources told TOI the ministry had said raising minimum monthly pension to Rs 2,000 per subscriber would entail an additional financial burden of nearly Rs 4,500 crore, and Rs 14,595 crore, if it were raised to Rs 3,000 per month.
In Thursday’s meeting, officials also conceded before the panel that a chunk of EPFO funds invested in the stock markets had turned into bad investments and yielded negative results in the aftermath of the coronavirus-induced upheaval.
Quizzed over the “very glaring” negative returns the fund’s investments had earned in March last year, the House panel had last October asked EPFO central commissioner Sunil Barthwal and labour secretary Apurva Chandra to explain why EPFO funds were invested in the stock market in March 2020 when the coronavirus-induced volatility had upended markets and investments could have been avoided. The panel had pointed, in particular, to the exposure of EPFO funds to the debt-laden IL&FS and other housing funds.
Sources said officials informed the committee that only Rs 4,600 crore of the total Rs 13.7 lakh crore fund corpus of EPFO — totalling 5% of the corpus — is invested in the markets. Chandra and Barthwal also told the panel that the government is deliberating on ways to ensure that EPFO funds are invested in products and schemes that are “not fraught with risk”.