Employees' Pension Scheme amendment: Commuted value of pension restored; to impact 6 lakh pensioners

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Employees' Pension Scheme amendment: Commuted value of pension restored; to impact 6 lakh pensioners

In some good news for pensioners, the Central Board of Trustees (CBT) approved a proposal to recommend the restoration of the commuted value of pension after 15 years. The amendment in the Employees' Pension Scheme (EPS) 1995 will benefit around 6.3 lakh pensioners. The decision that was taken at the 225th meeting of CBT held in Hyderabad on August 21 was a long-pending demand of pensioners.

In a notification, PIB stated, "In a major decision, the Central Board of Trustees (CBT) EPF in a meeting held at Hyderabad on 21 August 2019, approved the proposal to recommend for amendment in Employees' Pension Scheme (EPS) 1995 for restoration of commuted value of pension to the Pensioners after 15 years of drawing commutation which will benefit approx. 6.3 lakhs pensioners. This was a long pending demand of the pensioners."

Commuted value is the net present value of a future financial obligation. The total pension obligation is a product of long-term interest rates and life expectancy of a pensioner.

Some of the other decisions taken at the meeting are as follows:

EPFO claims settlement

Minister of State for Labour and Employment Santosh Kumar Gangwar who is also the Chairman of CBT stated that Employees' Provident Fund Organisation (EPFO) has been settling more than 91 per cent of claims by EPF members in online mode. He also lauded the efforts to improve settlement of claims of deceased members' families.

"He also appreciated the good governance strategy adopted by EPFO in saving of Rs 22 crores p.a. due to negotiating reduced OD charges increased FD interest and waiver of collection charges by SBI and further savings of Rs 50 lakhs p.a. due to reduction in collection charges by three banks and achievement of highest yield (8.55%) by Portfolio Managers since July 2015," stated PIB.

Other key decisions

Selection of ETF Manufacturers: The Board approved the decision to choose the Exchange Traded Fund (ETF) manufacturers through public bidding by 30 October 2019, extension of the term of the present ETF manufacturers (SBI MF and UTI MF) till then and also to authorised the Finance Investment & Audit Committee (FIAC) to conduct the exercise of choosing ETF manufacturers.

Allocation of investment in Nifty 50 and Sensex: The Board approved the proposal that the fund allocation between Nifty 50 and Sensex ETFs be divided evenly, i.e. in the ratio of 50% to 50%.

Exercise of early redemption options available in DHFL Bonds: The Board approved for early redemption option in DHFL bonds recommended by FIAC.

Withholding Investments in bonds of private sector companies: The CBT approved the decision to withhold any further investment in Private Sector Companies Bonds and to compulsorily consider one of the two required ratings necessarily from CRISIL, CARE, ICRA & India Ratings for investments in PSU Bonds category.

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