KARACHI: The Employees’ Old-Age Benefits Institution (EOBI) pension fund is fast depleting even at the current minimum pension rate, and if the percentage of contribution made by employers and employees is not enhanced and matching grant is not made by the federal government, the entire fund will exhaust by the year 2027, official sources confided to Dawn on Wednesday.
The EOBI is currently paying around Rs15 billion towards pension fund per annum based on minimum pension rate of Rs3,600 per month.
However, the federal budget 2013-14 has recommended to enhance the minimum pension to the level of Rs5,000 per month.
Even the provisions of Labour Policy 2010 allowed increase in pension amount in the same ratio as would be allowed to government employees, sources added.
The issue of enhancing minimum pension amount and its implications on the fund was also raised in a recent meeting of the EOBI’s Board of Trustees (BOT) held in Islamabad.
The trustees were categorically informed by the actuary that if the minimum wage is enhanced to Rs10,000 (present Rs8,000) per month, minimum pensions would go to Rs4,000 pm, and this will start depleting EOBI’s pension fund from 2022, and it will exhaust by the year 2028.
Sources said that the actuary dilated further that if the minimum pension is enhanced to Rs4500, then depletion of fund will start in 2012 and finish in the year 2027.
Similarly, if the minimum pension is increased to Rs5000, the depletion process will start from 2020 and the entire fund will be exhausted by the year 2026.
It was also pointed out by the actuary that if the minimum pension amount is raised to Rs5000 per month, the per annum pension fund requirement would soar from Rs15bn to Rs20bn, and this will start depleting the fund from 2020 and will be entirely exhausted by the year 2026.
The employees’ representatives in the meeting, sources said, suggested that employee contribution which is at present 1pc may be enhanced to 2pc whereas employer’s contribution be raised from 5pc to 7pc and the federal government should make matching contribution of 9pc which will take the total contribution towards pension fund to 18pc and this will ensure fund’s sustainability on long term basis.
Sources disclosed that after thread-bare discussion and due consideration of the actuarial report, the EOBI’s Board of Trustees in the second round of their meeting held on March 1, 2014, which was chaired by federal secretary Ministry of Overseas Pakistanis and Human Resource Development Munir Qureshi, it was noted that it is mandatory upon the EBOI under Section 21 of EOB Act, 1976 that change in pension is supported by actuarial to be sustainable at least for next 50 years but the present position of fund’s inflows and outflows as assessed by actuarial valuation suggest that pension fund will become negative by 2027 at present rate of benefit of Rs3,600 per month being minimum pension.
Therefore, any increase will not be supported by legal provision.
However, the members of BOT were of strong opinion that since the federal budget 2013-14 and Labour Policy recommends that minimum pension amount should be Rs5000, therefore, it should be honoured, but the additional burden of Rs1400pm in pension amount be picked up by the federal government to ensure sustainability of the pension fund.