The EPFO’s ATM plan is good but it must resolve its pension muddle first

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Subscribe to enjoy similar stories. The country’s principal manager of retirement savings for private-sector employees, the Employees’ Provident Fund Organisation (EPFO), is working on a facility to let subscribers withdraw funds from their corpus through ATM cards, subject to a limit. While this would be welcome, the EPFO also finds itself being held responsible for a pension crisis that has put about 1.75 million retirees in dire straits, pushing many to despair.

It speaks not just of the EPFO’s functional inefficiencies, but also its structural flaws. It also highlights the superiority of an alternative retiral scheme that the government created for its own employees and then threw open to the private sector: the National Pension System (NPS). The crisis has its roots in an ill-designed pension started by the EPFO in 1995 that was funded with a little over two-thirds of the employer’s mandatory contribution of 12% of an employee’s salary to the fund.

The pension payout has no link with the returns generated by investing the corpus. It is one-seventieth the product of one’s length of eligible service and the average pensionable salary of one’s final 60 months before retirement at age 58. For a while, employees had the option of contributing a share of their total salary, rather than the cap—raised in steps from ₹5,000 a month to ₹15,000—for mandatory PF participation.

This would raise their pension. When the option was withdrawn, employees challenged it in court and won. The EPFO appealed against this at the Supreme Court, which in November 2022 ruled against it and gave serving as well as retired employees a four-month window to exercise the higher-pension option.