Today’s EPFO Board Meeting: Three things to look at

The central board meeting of the Employees Provident Fund Organization (EPFO) on Wednesday is likely to decide on a shift in pension payments and contributions under the employee’s pension scheme.

NEW DELHI: The central board meeting of the Employees Provident Fund Organization (EPFO) on Wednesday is likely to decide on a shift in pension payments and contributions under the employee’s pension scheme. Besides, it is likely to debate on its equity investments and delay in interest payout for 2019-20. Here are the details.

Higher Pension:

The EPFO board Wednesday may allow well-paid employees to contribute more to the pension corpus, and link payout with an individual contribution. If approved it will affect a shift from the current formula, where pension contribution goes to a common pool and earning from it, decides pension outgo instead of individual contribution. It may also allow pension deduction on the overall wage than the current basic wage for relatively higher-paid subscribers.

Interest Rate:

Though the EPFO announced an 8.5% interest rate in March for 2019-20, it has not been credited to the subscriber’s account as yet. The finance ministry is yet to formally approve the rate of payout. Though around 3,500 crores of dividend and sale of its ETF investments were factored in while calculating the interest rate in March 2020, the retirement fund may update it’s board members on the delay and it’s earning from equity investments.

The pension fund has invested over 1.03 trillion in exchange-traded funds (ETFs) but its notional return has been poor. EPFO will discuss such investments and, more so, it’s participation in the government-backed CPSE-ETF and Bharat 22 ETF as they have been laggards. While the overall cumulative return is almost -8.3% as of 31 March for its 1.03 trillion equity investments, its return on investments in government-backed Central Public Sector Enterprises (CPSE) ETF has given it a -24.36% return. Similarly, in the government-backed Bharat 22 ETF, EPFO’s return on investments is -19.73%. The other two ETFs run by SBI Asset Management Co. and UTI Asset Management Co. have yielded -6.19% and -10.06% for the retirement fund manager.

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