The decision to provide the entitlement under Employees' Pension Scheme-95, run by the Employees' Provident Fund Organisation, was taken by the Union Cabinet in its meeting held here.
The move will immediately benefit about 28 lakh pensioners including five lakh widows. There are 44 lakh pensioners.
Earlier this month the EPFO trustees had approved the proposal. The Central Board of Trustees (CBT), the apex decision making body of EPFO had met on February 5, and decided to amend the EPS-95 scheme for the purpose.
The proposal was placed before the Union Cabinet for approval as the government had made funding provisions for it.
The government would have to provide an additional amount of around Rs 1,217 crore to ensure the minimum pension of Rs 1,000 starting 2014-15.
Pensioners will get the benefit with effect from April 1. The proposal has already been approved by the Finance Ministry.