The government is reviewing its proposal to allow private sector workers to switch between Employees' Pension Scheme (EPS) and the National Pension Scheme (NPS). The rethink has come as representative employers and employees offered mixed reactions in a recent consultation meeting with the labour and employment ministry, according to reports.
The government had proposed amendments to the Employees' Provident Fund Act, 1952 in August. The move was initially announced by former Finance Minister Arun Jaitley in his Union Budget 2015-16 speech. The amendment proposed to allow private employees an option to switch between EPS and NPS, which is currently not possible.
The EPS is administered by the Employees' Provident Fund Organisation (EPFO) providing fixed pension beginning from 58 years of age until death while NPS is a defined contribution retirement scheme administered by Pension Fund Regulatory and Development Authority. The returns offered by EPS are paid on a monthly basis and is fixed but the NPS returns are market-linked. EPS is tax-free while, 60 per cent of the NPS corpus upon retirement is tax-free and the rest 40 per cent has to be invested in an annuity.
RSS-affiliated Bharatiya Mazdoor Sangh (BMS) that was one of the few trade unions to attend the meeting rejected the proposal. It said that NPS is risky and market-linked and returns on EPS are much more. "EPS has more benefits, including that to family members, insurance, widow pension, etc, whereas NPS has a lock-in period of 15 years for withdrawal," said BMS, as mentioned in a report in Business Standard.
NASSCOM said that the bill enables employees to switch between EPS and NPS, which will pose a huge administrative burden for the employer every time the employee exercises the option since the employer will have to transfer the accumulated amounts back and forth, as mentioned in the daily.