Need to save EOBI pension scheme
The author has served EOBI for 40 years and is currently the Director of Social Safety Net, Pakistan
Employees’ Old-Age Benefits Act,1976 was enforced with effect from April 15, 1976, to achieve the objective of Article 38(C) of the Constitution, by providing Compulsory Social Insurance to employees when they are unable to perform any work due to old-age or disability.
EOB Act,1976 applies to every industry, business, commercial, educational, healthcare, charitable and other organisations, employing 5 or more persons, except persons in the service of State or Statutory bodies, like Armed forces of Pakistan, Ordnance Factory, Police, Pakistan Railways, WAPDA, Cantonment Boards and Municipal bodies, etc.
The core functions of the Employees Old-Age Benefit Institution (EOBI) are: registration of employers and their employees; collection of contribution from registered employers and insured persons (IPs); disbursement of monthly pension to pensioners; and management of pension fund.
EOBI Pension Scheme is a contributory scheme, featuring a monthly contribution equal to 5% of current minimum wages paid by the registered employers of all the industrial, business, commercial and other organisations, where EOB Act, 1976 is applicable, and a monthly contribution equal to 1% by IPs that was introduced to create a sense of participation amongst the IPs since July 2001.
Employees registered with EOBI are called IPs who are entitled to avail benefits as per law, like Old-Age Pension, Survivors Pension, Invalidity Pension, Reduce Pension, Parents & Minor Pension and lump-sum Old-Age Grant. The eligibility for EOBI pension requires an age limit of 60 years for male IPs and 55 years for women and mine workers IPs with at least 15 years of Insurable Employment with paid contributions. The first EOBI Pension was issued in 1983 at the rate of Rs75 pm, which has increased 20 times through a prescribed Actuarial Valuation of EOBI assets and liabilities. At present the minimum monthly pension is Rs10,000 and maximum pension is Rs21,000 determined as per the EOBI Pension formula.
Currently, EOBI is facing the worst administrative and financial crisis of its history, due to stoppage of Matching Grant from Federal Government since 1995. Also, there is need for the formation of a new 16-member tripartite Board of Trustees (BoT) and appointments on hundreds of vacant post including permanent Chairman of EOBI, DG Operations, DG Investment and Secretary BoT. Presently, EOBI is working with only 40% of its approved strength.
EOBI’s performance is also badly affected due to extraordinary delay in the processing of pension cases at regional offices across the country. EOBI does not receive any financial assistance from the federal or provincial governments for carrying out its operations.
A majority of the employers are violating the EOB Act, 1976 by denying the employees their basic right to pension. Presently, the number of registered employers is 149,130, but only 40,000 are paying the monthly contribution.
The latest 11th Actuarial Valuation of EOBI Pension Fund carried out in terms of IPSAS-39 (International Public Sector Accounting Standards) shows that Pension Fund is having deficit of Rs2.517 trillion as of June 30, 2022, with Total Accrued Liability Rs2.965 trillion and value of Fund Rs0.448 trillion. The EOBI Fund is anticipated to start decreasing in the next 5 to 10 years and may exhaust fully in the next 11 to 16 years, assuming that the current 6% monthly contribution by employers continues.
EOBI is adding 0.5 million IPs and over 50,000 pensioners annually and disbursed Rs51 billion worth of pension during FY2022-23 even though the total contribution from the registered employers was only Rs40 billion.
Despite all the odds, EOBI — which will turn 50 in 2026 — is fulfilling its national duty of providing monthly financial support to the elderly, invalid and widows.
The Federal Government is suggested to carry out urgent reforms and make amendments in the EOB Act, 1976 by introducing a ‘Universal Pension Scheme’ for self-registration of every employee at the age of 18 years for provision of Compulsory Social Pension benefits after retirement and disability. Besides, the current monthly contribution rate must be revised to increase from 6% to 8% and 1% to 2% for registered employers and IPs respectively.
Published in The Express Tribune, April 24th, 2024.
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