With an aim to increase the return on the retirement corpus, the Employees’ Provident Fund Organisation (EPFO) is considering a proposal to raise the equity investment limit to 25 per cent, from the existing 15 per cent, according to an ET report. Its Finance Investment and Audit Committee also met about two weeks ago to discuss the matter.
The proposal envisages raising the equity exposure to 25 per cent in two phases — to 20 per cent in first phase and 25 per cent in second, according to the report. The plan is likely to be discussed in the EPFO Central Board of Trustees’ (CBT) meeting in the last week of this month. After the finalisation of the proposal at the EPFO, it will be sent to the finance ministry and labour ministry for their approvals, according to the report.
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According to the report, if the equity investment limit rises to 25 per cent, the EPFO may pump invest Rs 3,000 crore in the stock market every month.
Last week, the government ratified a four-decade-low interest rate of 8.1 per cent on employee provident fund deposits for 2021-22. The decision will impact about five crore subscribers of the Employees’ Provident Fund Organisation (EPFO).
The EPFO had in March decided to pay an interest rate of 8.1 per cent on EPF amount for 2021-22, compared with 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it stood at 8 per cent.
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The labour and employment ministry has conveyed the approval of the central government to credit 8.1 per cent rate of interest for 2021-22 to each member of the EPF scheme, according to the PTI report quoting the EPFO office order issued on Friday. The labour ministry had sent the proposal to the Ministry of Finance for its concurrence.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5 per cent. EPFO had provided an 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18.
The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than the 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.
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EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The scheme, which is managed under the aegis of the EPFO, covers every establishment in which 20 or more persons are employed.
Employees have to pay a certain contribution towards the provident fund and the same amount is paid by the employer on a monthly basis. At the end of retirement or during the service (under some circumstances), the employees get the lump sum amount including the interest on PF contributed which gets accrued.
