board meeting of Employees Provident Fund Organization (EPFO) is going to take place next month, and a proposal to increase the equity investment limit from 15 per cent to 25 per cent is likely to be discussed, according to an ET report. The Finance Investment and Audit Committee of EPFO also met last month to discuss the matter.
At present up to 15% of the total PF (Provident Fund) The corpus can be invested in equity. The latest proposal envisages increasing the equity exposure to 25 per cent in two tranches – 20 per cent in the first tranche and 25 per cent in the second tranche. The move is aimed at increasing the return on retirement corpus.
EPFO has said, “The 231st meeting of the Central Board of Trustees (CBT) of EPFO will be held on July 8 and 9 in Bengaluru.” After the proposal is finalized in the EPFO, it will be sent to the finance ministry and labor ministry for their approval, according to the report.
The recommendations of the four sub-committees constituted under the EPFO are also likely to be discussed and finalised. The ET report said the committees deal with matters related to establishment, enhancement of digital capabilities, issues related to social security code and pension.
According to another report, if the equity investment limit is increased to 25 per cent, then the EPFO can invest Rs 3,000 crore every month in the stock market.
Earlier this month, the government approved a four-decade low epf interest rate 8.1 per cent on Employees’ Provident Fund deposits for 2021-22. About five crore subscribers of EPFO will be affected by this decision.
In March, the retirement fund body had decided to pay an interest rate of 8.1 per cent on the EPF amount for 2021-22, as against 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it was 8 per cent.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was reduced to 8.5 per cent. EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18. The interest rate was slightly higher at 8.8 per cent in 2015-16. It offered 8.75 per cent interest rate in 2013-14 as well as 2014-15, up from 8.5 per cent in 2012-13. The interest rate in 2011-12 was 8.25 per cent.
A mandatory savings scheme under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, the EPF scheme is managed under the aegis of EPFO and covers every establishment employing 20 or more persons.
The employees have to make 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 service (under certain circumstances), employees get lump sum amount along with interest on PF contribution which accrues.
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