Previous

Part - II

Pension Funds in the Indian Context

In the Indian set-up we can have the following existing models of pension funds: -

1) Employees' Provident Fund (EPF)
The EPF programme, established in 1952, is a contributory provident fund providing benefits upon retirement, resignation or death, based on the accumulated contributions plus interest, from employers and employees.
Subscribers to the EPF have the option to make partial withdrawals for specified purposes such as house construction, higher education for children, marriage, and medical expenses associated with illness. Establishments covered by the EPF can either have the EPFO manage the provident fund, or can undertake processes to qualify as an exempt establishment, whereby they manage the provident fund themselves. In general, exempted establishments are large companies. (Private Provident Funds).

The flipside is that in India EPF has been used more as medium of tax evasion by the salaried classes as the entire amount deposited in EPF is deductible for income-tax estimation purposes. This negates the purpose for which it was originally set up.

2) Employees' Pension Scheme (EPS)
The EPS, established in 1995, provides for the payment of a member's pension upon the member's superannuation/retirement, disability, and widow/widower pension, and children's pension upon the member's death. The EPS program has replaced the erstwhile Family Pension Scheme (FPS). Employers that are not mandated to be covered may voluntarily apply for coverage. The new scheme, known, as the Employees' Pension Scheme (EPS), is essentially a defined-benefit program providing earnings related pension on superannuation, disability or death. Thus, EPF members are now eligible for two benefit streams on superannuation - a lump sum EPF accumulation upon retirement and a monthly pension from the EPS.

Next

* Contributed by -
Swetha Narayanaswamy,
First Year M.B.A.,
ICFAI Business School, Mumbai.