The Employees’ Pension Scheme (EPS-95), which is under the control of the Employees’ Provident Fund Organisation (EPFO), was established in 1995. It is a critical social security program for private-sector retirees. The current minimum pension of Rs 1,000 since September 2014 has led to demands from across the country to raise it to Rs 7,500, a 650% increase. The pensioners, trade unions, and public representatives have all been vocal about the increase to counter the scourge of inflation, with representations and court verdicts exerting pressure.
Current EPS-95 Contribution Mechanism
The EPS-95 operates as a “Defined Contribution-Defined Benefit” scheme. Employers contribute 8.33 percent of an employee’s wages towards the pension fund, and the central government budgetary supports it with 1.16 percent of wages, subject to a maximum of Rs 15,000 per month. Pension benefits are paid out of this accumulation. However, a valuation of the fund as of March 31, 2019, pointed to an actuarial deficit, thereby making it difficult to increase pensions unless additional government support is forthcoming. Notwithstanding, the government is compensating the fund to the extent of the minimum pension at Rs 1,000.
Government’s Response To Pension Hike Demands
On 24 July 2025, Minister of State for Labour and Employment, Shobha Karandlaje, answered questions in the Rajya Sabha on the long-standing demand for pension hikes. She acknowledged various stakeholders, including trade unions, representing the case for an increase from Rs 1,000 to Rs 7,500 per month. No final decision has been taken yet, but the government is indeed considering the proposal. Earlier in February 2024, the Ministry of Labour & Employment recorded similar demands, and a High-Level Monitoring Committee had recommended that the minimum pension be raised to Rs 2,000. This recommendation was, however, rejected by the Finance Ministry, as clarified by the EPFO on 18 June 2025.
Expected Pension Hike And Its Impact
Major pensioners and employees’ unions see the prospects of a rise to Rs 7,500 with the hope that such an increase would substantially guarantee financial security for some 78 lakh EPS-95 pensioners. A major shift will come forth with such a hike, giving the retirees some more purchasing power in times of inflation.This figure, however, is yet to be confirmed by the government and the EPFO. This leaves the possibility of other amounts like Rs 2,000 or Rs 3,000. Resolution of the issue is to be the centre at the forthcoming Union Budget of 2025 on 1 February, as the concerned stakeholders will press for it, given the advent of the festive season.
Challenges And The Way Forward
The actuarial deficit in the EPS fund is still a major hurdle, as pinpointed by Minister Karandlaje, although the corpus is sufficient, with unclaimed funds. There is an issue of financial sustainability. The fact that the Government is going to commit budgetary support over and above the normal 1.16% contribution is an indication that it is concerned about pensioners and desires to see their needs addressed.
On this issue, a parliamentary panel is now looking into the feasibility of the hike, and it will definitely decide by the end of 2025. Pensioners are still far and in need of clarity on which way the Government will move – to effect a transformation in the form of the Rs 7,500 minimum pension, as has been their long-standing demand for years.
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