Calcutta, Mar 12: Approved Superannuation Funds (ASFs) worth Rs 7,000 crore, set up by various private sector companies, are being manipulated to let the corporate top brass of today gain an undue advantage over employees who retired earlier, the Company Pensioners' Association has alleged."The ASFs are formed under the Income-tax Act and are fully exempted from income tax. Our pleas to the government to check such manipulations have been ignored over the years, though these funds can be regulated under the Act," the secretary of the association, Jolly Kaul, told The Financial Express.
Examples of manipulations? The director's post has a salary bar. In a particular company, retiring executive directors are made the presidents of the company for a month with a high salary, so that they can retire with a high pension too.
Similarly, the directors' salaries for pension purposes are often calculated by including the commissions that they had earned. Rules are also changed regarding calculations, making the last salary the basis of calculations, while in most cases earlier an average salary for the last five years used to be the basis.
"Ultimately, the pension of the retiring lot of the day becomes unmaintainable on the amount that the company had contributed on their account to the fund. It eats into the huge fund that exists for years and, in effect, these people benefit at the cost of the employees who had retired earlier," Kaul said.
According to Kaul, directors retiring today might have a pension of Rs 60,000 per month, whereas those who had retired in the early eighties might be getting only Rs 5,000 per month or even less. As a result, a few of the ASF managing trusts have even complained of shortage of funds.
Kaul said these funds are managed by a trust which normally has some senior officers of the company and some directors as trustees. Pensioners are not included.
Pensions do not have any kind of inflation indexation either and after about a decade the pension turns out to be a paltry sum. "The government can check the manipulations by issuing detailed guidelines like the British government had, the latest update of which runs to 250 pages. However, we saw the finance ministry and the labour ministry tossing the ball into each other's courts when we approached them," Kaul said.Since its formation, the association has urged the government to make inflation indexation mandatory for the ASFs. The association has corresponded with finance ministers since 1985 starting from VP Singh to P Chidambaram. "Sadly none of them bothered to take a look at the issue, referring it to the labour department," Kaul said.
The labour department finally looked into it when PA Sangma was the minister only to find that these are exempted funds created under the Income-tax Act and can be regulated by the department of revenue.
The association, formed in 1985, has hundreds of members spread all over the country. "We are planning to have an All India Convention in October and will try to meet the new finance minister as soon as he is in place," Kaul said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
