Pension for 40 lakh organised sector workers may double to Rs 2,000 per month in FY21 Budget

The Union Budget for 2020-21 may see the minimum pension for those working in the organised sector double to Rs 2,000 per month, a measure that could drive up demand immediately by giving more money into the hands of about 40 lakh such workers.

The proposal may cost the exchequer Rs 3,000 crore but will help boost a four-decade low consumption and give a leg-up to the slowing economy.

Sources told DH that the move will also help these 40 lakh workers in the organised sector, who earn less than Rs 15,000 per month. These workers are covered under the Employees Pension Scheme (EPS).

“It was a long pending demand by various employees unions, especially after the pension for those in un-organised sector was announced to be at Rs 3,000 per month in the Budget for 2019-20.,” they said.

The pension scheme under EPS is provided by the Employees’ Provident Fund Organisation (EPFO), which ensures that employees receive a pension once they attain the age of 58.

An employee contributes 12% of his or her basic salary to EPF and the employer matches this contribution. However, 8.33% of the employer's contribution to the EPF is diverted towards EPS.

The scheme acts as a regular source of income after an employee retires.

Apart from increasing the pension limit, the old provision of commutation or advance partial withdrawal of EPS could also be restored in the Budget to be presented on February 1 by Finance Minister Nirmala Sitharaman. Sources said.

A high powered committee on pension had last year suggested the government to increase pension for the organised sector workers as less than Rs 50 per day was not enough to take care of their day-to-day needs.

The committee had estimated that the government's expenditure on pension to organised sector after the move could rise to Rs 12,000 crore per annum from Rs 9,000 crore at present.