StaffCorner

05 Sep, 2022 10:34a.m.

EPFO proposes hiking the retirement age to reduce strain on pension funds

epfo-proposes-hiking-the-retirement-age-to-reduce-strain-on-pension-funds

The Employees' Provident Fund Organization (EPFO) has advocated for raising the retirement age in the country and bringing it into line with life expectancy in order to guarantee the sustainability of the pension system in India and provide adequate retirement benefits.

India is moving into an older society and it is predicted that by 2047, 140 million individuals will be over 60. The burden this puts on pension funds around the world might be enormous.

According to the EPFO's document, raising the retirement age "may be considered going forward in line with the experience of other nations and will be crucial to the survival of pension systems."

"Raising the retirement age would imply depositing bigger quantum pensions for longer duration with EPFO and other pension funds in the country and will assist balance inflation," a senior government official said in response to the EPFO's recommendation.

Will this also make the central government consider the hike in the retirement age for central government employees? The last time the retirement age (superannuation) for central government employees was raised was in 1998. The age was raised from 58 to 60. The Fifth Central Pay Commission's recommendations served as the basis for the raise. With the eighth central pay commission nearing the due, the government can consider hiking the retirement age. 

People are living longer and healthier than ever thanks to rising life expectancy and falling fertility rates. Additionally, the workforce is getting older as a result of this. The central government pensioners will grow more dependent on the government for pension pay-outs to meet their post-retirement living expenses.

The Economic Advisory Council to the Prime Minister recommended raising the retirement age in August 2021, noting that longer life expectancies are expected to persist due to improved health infrastructure and enable older workers to continue to contribute to society for longer than any previous generation. It suggested a gradual increase in retirement age because India is a youthful country with a large working population. It also highlighted how difficult it is for a nation to achieve delaying the retirement age in order to expand the working-age population and avoid having the social security system under pressure.

Earlier this year, the Andhra Pradesh Public Employment (Regulation of age of superannuation) (Amendment) Ordinance, 2022 was passed which brought the retirement age for state employees to 62. It was only in 2014 that the state hiked the retirement age from 58 to 60.

The cumulative pension and provident fund corpus of the EPFO, which has close to 60 million subscribers, exceeds Rs 12 trillion. The Pension Fund Regulatory and Development Authority (PFRDA) would be a part of the EPFO's plan, according to ET. The PFRDA is responsible for overseeing the national government's National Pension Scheme.

The elderly population in India, defined as those aged 60 and over, is predicted to increase by 41% from 138 million in 2021 to 194 million in 2031, according to the National Statistical Office's (NSO) Elderly in India 2021 report. This increase will be driven by an increase in the population and an increase in both male and female life expectancy.

The EPFO predicted that as a result, "the number of persons requiring old age income and health security will grow up enormously."

In the European Union, the retirement age is 65, while it ranges from 58 to 65 in India. The retirement age is currently 67 in Denmark, Italy, and Greece, and 66 in the US, mainly due to the ageing populations in most of these countries.

Also read: Case for the hike in the retirement age to 62 for central government employees




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