Advertisement

EPFO retains 8.5 pc interest on EPF deposits for 2020-21

04:50 PM Mar 04, 2021 | Team Udayavani |

New Delhi: Retirement fund body EPFO on Thursday decided to retain 8.5 per cent annual rate of interest on provident fund deposits for the current financial year for its more than five crore active subscribers.

Advertisement

The Employees’ Provident Fund Organisation’s (EPFO) apex decision-making body Central Board of Trustees decided to fix 8.5 per cent rate of interest for 2020-21 at its meeting in Srinagar on Thursday.

“The Central Board of Trustees (CBT) recommended 8.50 per cent annual rate of interest to be credited on EPF accumulations in members’ accounts for the financial year 2020-21,” a labour ministry statement said.

According to the statement, the 228th meeting of the CBT, EPFO was held on Thursday in Srinagar, Jammu & Kashmir under the chairmanship of Union Minister of State for Labour & Employment(Independent Charge) Santosh Kumar Gangwar.

As per the practice, the CBT decision on interest rate would be send to the finance ministry for concurrence. After getting the finance ministry’s nod, the 8.5 per cent rate of interest for this fiscal would be credited into the EPFO subscribers’ accounts.

Advertisement

The interest rate would be officially notified in the government gazette following which the EPFO would credit the rate of interest into the subscribers’ accounts, the statement said.

“For FY’2021, the EPFO decided to liquidate investment (in equity) and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realised from equity investment.

This has enabled EPFO to provide higher return to its subscribers and still allowing EPFO with healthy surplus to act as a cushion for providing higher return in future also. There is no over-drawal on EPFO corpus due to this income distribution,” it said.

Talking to PTI, K E Raghunathan, an EPFO trustee said the EPFO would have a surplus of around Rs 300 crore on maintaining 8.5 per cent rate of interest for the current fiscal at par with 2019-20.

Since FY’2014, the EPFO has consistently generated returns of not less than 8.5 per cent. A high EPF interest rate along with compounding makes a significant difference to gains of subscribers. This is despite the fact that the EPFO has consistently followed a conservative approach towards investment, putting highest emphasis on the safety and preservation of principal first approach. Risk appetite of EPFO is very low, since it involves investing poor man’s retirement savings also, it added.

According to the statement, the EPFO over the years has been able to distribute higher income to its members through various economic cycles with minimal credit risk. Considering the high credit profile of the EPFO investment, the interest rate of the EPFO is considerably higher than other comparable investments avenues available for subscribers.

During the period from 2015-16, the EPFO prudently started investing in equity through exchange traded funds based on the NSE 50 and BSE 30 indices.

The investment in equity assets started from 5 per cent for FY’2015 and subsequently went up to 15 per cent of the incremental portfolio.

The assured fixed return approach of the EPFO, announced by the CBT every year, along with the tax exemptions makes it an attractive choice for investors, providing them with strong social security in the form of provident fund, pension and insurance schemes, the ministry said.

Earlier this year, there were speculations that the EPFO would lower interest on provident fund deposits for this fiscal (2020-21) in view of more withdrawals and lesser contribution by members amid the coronavirus pandemic.

In March last year, the EPFO had lowered interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20, from 8.65 per cent in 2018-19.

The EPF (Employees Provident Fund) interest rate provided for 2019-20 was the lowest since 2012-13, when it was 8.5 per cent.

The EPFO had provided 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 8.5 per cent for 2012-13. The EPFO had provided 8.25 per cent rate of interest on provident fund in 2011-12.

Advertisement

Udayavani is now on Telegram. Click here to join our channel and stay updated with the latest news.

Next