EPFO backs raising the retirement age to ease pressure on pension funds
Contents News/Article Date: 4th September 2022
Relating to which Act: The Employees Provident Funds & Miscellaneous Provisions Act, 1952
Type: EPFO said in its Vision 2047 document and featured in ET
Pertains to Employers and Employees
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EPFO backs raising the retirement age to ease pressure on pension funds. In India, the retirement age varies between 58 to 65 years depending on whether it is a public sector enterprise or a corporate entity. However, across the European Union, the retirement age is 65 years, while it is 67 in Denmark, Italy and Greece, and 66 in the US. Most of them have an aging population.
For pensionable service, a member has to complete 10 years of service or more, after which he is eligible for a monthly pension depending on the formula. The existing practice is that pension stops at 58 years of service and a member becomes eligible for a monthly pension even though he may continue to work after 58 years of age, as then the full contribution goes only into PF and not pension.
Now the authorities are of the thought that “Raising the retirement age would mean a deposit of higher quantum pensions for longer duration with EPFO and other pension funds in the country and will help offset inflation.
So till then, let us hope for the bet
Subject: EPFO backs raising the retirement age to ease pressure on pension funds
For greater details, appended below is the complete news item
EPFO backs raising the retirement age to ease pressure on pension funds
The Employees’ Provident Fund Organisation (EPFO) sees a case for substantially in increasing the retirement age in India and aligning it with life expectancy to ensure the viability of the pension system in the country and provide adequate retirement benefits.
India is projected to become an aging society by 2047 with an estimated 140 million people above the age of 60 years. This is expected to put immense pressure on the pension funds in the country.
“Increasing the retirement age, going forward, could be considered in line with the experience of other countries and will be key to the viability of pension systems,” EPFO said in its Vision 2047 document.
“Raising the retirement age would mean a deposit of higher quantum pensions for longer duration with EPFO and other pension funds in the country and will help offset inflation,” a senior government official told ET, explaining the suggestion.
The vision document has been shared with the states and discussions will soon start with other stakeholders including the employers and the employees as well.
EPFO is the custodian of a cumulative pension and provident fund corpus of over ₹12 lakh crore of its nearly 60 million subscribers. The EPFO is likely to rope in the Pension Fund Regulatory and Development Authority, which administers the National Pension Scheme of the government, in this comprehensive plan.
Labour economist KR Shyam Sundar said the move will have a mixed impact. “It will ensure that the family income of aged workers sustain the aggregate demand and provide growth impetus, while also saving the age discrimination present in the labour market today,” he said,
But on a net basis, raising the retirement age in a demand-constrained economy may not prove to be efficient and equitable as it will keep the youth waiting for a longer period to get a job and there will be skill wastage,” Sundar added.
India’s elderly population (aged 60 and above) is projected to touch 194 million in 2031 from 138 million in 2021, a 41% increase over a decade lifted by a higher population and a rise in life expectancy for both males and females according to the National Statistical Office (NSO)’s Elderly in India 2021 Report.
“Consequently, the number of people requiring old age income and health security will go up exponentially,” EPFO added.
In India, the retirement age varies between 58 to 65 years depending on whether it is a public sector enterprise or a corporate entity. However, across the European Union, the retirement age is 65 years, while it is 67 in Denmark, Italy, and Greece, and 66 in the US. Most of them have an aging population.
The Organisation for Economic Cooperation and Development in the 2012 edition of its ‘Pension Outlook’ said governments will need to raise retirement ages gradually to address increasing life expectancy in order to ensure that their national pension systems are both affordable and adequate.