The central government will ensure a minimum monthly pension of Rs1,000 to all retiring formal sector workers, ahead of Lok Sabha polls.
The move will bring immediate gains to 27 lakh pensioners, including 22 lakh pensioners under the Employees Provident Fund Scheme and 5 lakh widows eligible for pension, as of 31 March 2013, according to an official release.
There are about a total 44 lakh pensioners, including those that come under the New Pension Scheme, which is based on the contribution from provident fund.
"The labour ministry's revised proposal for minimum pension of Rs1,000 per month was submitted to the finance ministry last week, and is likely to be approved this month," said an official source.
The ministry's proposal to ensure minimum pension of Rs1,000 under the Employees' Pension Scheme 1995 (EPS-95), has been pending for a long time.
Earlier, the ministry had proposed an increase in its subsidy on the scheme from 1.16 per cent of basic wages to 1.79 per cent so as to assure a minimum pension amount of Rs1,000 per month.
However, the finance ministry opposed the proposal as this would have resulted in permanent increase in government's overall subsidy bill.
The labour ministry had since revised the proposal to a fixed annual grant of Rs1,300 crore for the purpose, and indicated that this amount can reduce over a period of time with more members subscribing to the EPS-95.
The government is also in the process of raising the basic wages ceiling under the Employees Provident Fund Scheme to Rs15,000 from the existing Rs6,500.
At present, all employees getting basic wages - including basic pay and dearness allowance - of more than Rs6,500 per month, are excluded from the EPF-linked social security schemes.
The EPFO has a corpus of around Rs5,00,000 crore, including around Rs1,70,000 crore in its pension fund. It has a subscriber base of around 5 crore and all of them are covered under the EPS-95.
The increase in wage ceiling will bring add around 5 million members to the EPF scheme and increase the flow mandatory savings.