Answer By law4u team
The Employees' Pension Scheme (EPS), managed by the Employees' Provident Fund Organisation (EPFO), is aimed at providing financial security to employees in the organized sector after retirement. It applies to employees who have been members of EPFO for a minimum period of 10 years. While EPS serves as a key pillar of social security, the current minimum pension of ₹1,000 per month has raised significant concern among retirees, many of whom argue that the amount is not enough to meet basic living costs. As a result, there is mounting pressure on the government to enhance the scheme’s benefits.
Current Minimum Pension Under EPS
The minimum pension under EPS is ₹1,000 per month, a threshold implemented by the Government of India effective from September 1, 2014, as part of a welfare measure to provide a basic level of income to pensioners.
Pension amounts under EPS are calculated based on the formula: (Pensionable Salary × Pensionable Service) ÷ 70, with a maximum considered pensionable salary of ₹15,000 per month.
If the calculated amount falls below ₹1,000, the Central Government provides the shortfall via budgetary support to ensure every eligible pensioner gets at least ₹1,000 per month.
Despite this provision, over 17 lakh pensioners receive this minimum pension, and many report severe financial hardship due to rising inflation, medical expenses, and urban living costs.
The EPS does not currently adjust for inflation or cost-of-living changes, meaning the purchasing power of ₹1,000 has significantly eroded over the years.
Proposals and Discussions for Increase
Over the years, several committees and stakeholders have raised the issue of inadequate pension amounts. The Parliamentary Standing Committee on Labour (2021) recommended increasing the minimum pension to ₹3,000 per month, considering the cost of essential goods and services.
Retired employees, particularly under EPS-95, have actively protested and staged hunger strikes across India, demanding a minimum pension of ₹7,500, along with DA (Dearness Allowance) benefits.
In 2024, Chennai EPF Pensioners’ Welfare Association proposed a revised minimum pension of ₹9,000 per month, along with DA and family pension provisions, citing the disparity between EPS pensioners and other government retirees (who receive 5x or more under other schemes).
There is also a push to link EPS pensions with inflation, like other statutory pension schemes, to ensure real-term value remains intact over time.
Government's Stance and Budgetary Support
The government currently contributes 1.16% of an employee’s basic wages towards EPS (within a wage cap of ₹15,000).
Despite numerous demands, the Ministry of Finance rejected a proposal in 2024 to raise the pension, citing budgetary constraints and lack of financial feasibility.
For FY 2023-24, the central government allocated ₹957 crore to maintain the minimum pension guarantee.
The Ministry of Labour and Employment has stated that any revision must be carefully studied to assess the impact on the EPFO’s sustainability, especially considering that EPS is a defined benefit scheme with long-term liabilities.
As of now, the EPFO is conducting an actuarial evaluation and a policy review, expected to conclude by 2025, to consider the feasibility of implementing any pension hike or structural reforms.
Example
Consider a factory worker who retired in 2016 after working for 25 years. Their pensionable salary was ₹10,000. As per the EPS formula:
(10,000 × 25) ÷ 70 = ₹3,571.
But if they had breaks in service or didn’t meet minimum conditions, their final pension might reduce. Now, take a worker whose calculated pension is only ₹850 — the government would supplement ₹150 to ensure they get ₹1,000 per month. However, the worker, now in their 70s, finds ₹1,000 insufficient for daily needs, medicines, and rent. Hence, they join national-level protests demanding a pension revision under EPS-95.
