Pension Commutation Restored, 6.3 Lakh Pensioners Pleased
- Tejas Rokhade
- Feb 26, 2020
- 2 min read
On February 20, the Labour Ministry notified about the decision of the Employees’ Provident Fund Organisation (EPFO) to restore pension of employees who had opted for commutation of their pension on or before September 25, 2008.
Crux of the Matter
Pleased Pensioners The move is set to benefit nearly 6.3 lakh pensioners who had retired before 26 September 2008 and receive their full pension after completion of 15 years. In August 2019, the EPFO’s Central Board of Trustees headed by the labor minister had approved the proposal to restore the commutation of the pension who had opted for the benefit.
These employees had got a lump sum at the time of their retirement due to commutation but now with the provision for commutation of pension being withdrawn by the EPFO the facility is now restored for all those who had opted for it before September 25, 2008.
Understanding the Issue Under the commutation, monthly pension used to be cut by one-third for the next 15 years and the reduced amount was given in lump sum. After 15 years, pensioners were entitled to get the full pension. An EPFO panel had recommended for amendment of the Employees Pension Scheme 1995 for the restoration of commuted value of the pension to pensioners after 15 years of drawing commutation.
Earlier, under this scheme members were allowed to commute one-third of their pension for 10 years, which was restored after 15 years.
Curiopedia
Commutation of Pension is a choice that the pensioner has if (s)he wants immediate lump sum amount. The person is required to give up a part or all of the pension payable if opting for commutation. In some countries, there is a tax benefit to partial commutation. More Info
Employees’ Provident Fund Organisation is an organization tasked to assist the Central Board of Trustees, Employees’ Provident Fund a statutory body formed by the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and is under the administrative control of the Ministry of Labour and Employment, Government of India. EPFO assists the Central Board in administering a compulsory contributory Provident Fund Scheme, a Pension Scheme and an Insurance Scheme for the workforce engaged in the organized sector in India. It is also the nodal agency for implementing Bilateral Social Security Agreements with other countries on a reciprocal basis. The schemes cover Indian workers as well as International workers. More Info
The National Pension System (NPS) is a voluntary defined contribution pension system in India. National Pension System, like PPF and EPF, is an EEE (Exempt-Exempt-Exempt) instrument in India where entire corpus escapes tax at maturity and entire pension withdrawal amount is tax-free. NPS started with the decision of the Government of India to stop defined benefit pensions for all its employees who joined after 1 January 2004. While the scheme was initially designed for government employees only, it was opened up for all citizens of India between the age of 18 and 60 in 2009. This scheme is regulated by the Pension Fund Regulatory and Development Authority. More Info
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