Skip to main content

EPFO may Give Part Payout in MF-Like Units

EPFO may Give Part Payout in MF-Like Units
Dividend on equity investments may also be distributed among its 45 million subscribers
Subscribers to the Employees' Provident Fund Organisation (EPFO) may soon get part of their retirement payout in the form of units proportionate to the money the state-run pension fund invests in equities, a senior official said. EPFO invests up to 15% of its annual incremental corpus -pegged at ` . 1.4 lakh crore -in stocks through exchange-traded funds (ETFs) to take advantage of higher returns from equities. The rest of the money is invested in government securities and other forms of debt.
However, on retirement, the subscriber gets a consolidated sum based on interest rate decided by the EPFO's central board of trustees (CBT). If the proposal cited above is adopted, then part of this payout will be in the form of units, similar to that of a mutual fund, that can be encashed at time of exit. This would also mean that the dividend earned by EPFO annually on its equity investment will be distributed among its 45 million subscribers, thus fetching them higher returns.
The return on equity investment isn't factored in while calculating the interest rate declared every year nor is it reflected in the PF statement. The cumulative return on EPFO's investment in equity was 13.72% until May in the two years since it began putting money in ETFs. EPFO declared an interest rate payout of 8.75% in FY15, 8.8% in FY16 and 8.65% in FY17.The labour ministry is finalising the unitisation policy, said the official cited above.
“The policy has been discussed with stakeholders and we hope the central board of trustees will approve of it when it meets later this month,“ the official added.If this proposal is implemented, subscribers can check the status of their PF in terms of investment in debt and equity-based units allotted to them. A subscriber may also be allowed to delay encashment of the units at the time of exit.
“Once a subscriber decides to withdraw their PF, 85% of total investment is paid back along with the rate of interest declared while their 15% of total investment made in equity is paid back by multiply ing the units accumulated with the value of equity on that particular day,“ said the official cited above.“The subscriber would also have an option to defer the withdrawal of equity investment by one to two years, depending on the tenure finalised by CBT, if he thinks the same can fetch better returns later.“ PF withdrawals are tax free.
EPFO has been raising the amount it invests in equities since 2015, when it started with 5% of the corpus. Its investment in FY16 was Rs 6,577 crore, rising to Rs 14,982 crore or 10% of its corpus in the following year. This year the investment limit has been raised to 15%, which translates into about Rs 20,000 crore being invested in ETFs.
The investment in equity has been opposed by trade unions on the grounds that returns are not assured and that, in the absence of any selloff policy, the returns remain on paper and do not bring monetary benefits. The proposal under consideration should counter that argument, the official said
The Economic Times, New Delhi, 5th October 2017

Comments

Popular posts from this blog

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...

After RBI rate cut, check latest home loan interest rates of top banks for loans above Rs 75 lakh

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. After the RBI repo rate cut, banks such as SBI, Canara Bank, PNB, and Union Bank among others have cut their repo linked lending rates. Most other banks are also expected to cut their lending rates in line with the RBI rate cut. After banks cut their lending rates, their home loan borrowers will have to pay less interest. Normally, when a lender cuts the lending rate, borrowers get two options: Either to go for a reduction in EMIs or reduce the tenure of the loan. The second option will help the borrowers clear their home loan outstanding faster. In case, the borrower goes for reduction in EMI then the lower lending rate of the lender would mean lower Equated Monthly Installment (EMI) for borrowers.   EMI is the amount you will pay on a specific date each month till the loan is repaid in full.A repo rate-linked home ...

GST collections rise 9.9% to exceed Rs 1.96 trillion in March 2025

  Gross GST collection in March grew 9.9 per cent to over Rs 1.96 lakh crore, government data showed on Tuesday. GST revenue from domestic transactions rose 8.8 per cent to Rs 1.49 lakh crore, while revenue from imported goods was higher 13.56 per cent to Rs 46,919 crore. Total refunds during March rose 41 per cent to Rs 19,615 crore. After adjusting refunds, net GST revenue stood at over Rs 1.76 lakh crore in March 2025, a 7.3 per cent growth over the year-ago period.       - Business Standard 02 th March, 2025