Home / News / India /  EPFO board meeting today: Three things to watch out for

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 employees 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 individual contribution. If approved it will effect a shift from the current formula, where pension contribution goes to a 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.

Currently, an employee pays 12% to the EPFO and a matching amount is given by the employer every month as statutory deduction from salary. Of the employer's 12% contribution, 8.33% goes to pension corpus and again this contribution is calculated based on a salary threshold of 15,000. In a CTC salary structure, both the employee and employer contribution is part of this portion. The EPFO board may change this and offer option for contribution on a higher salary structure.

Interest Rate:

Though the EPFO announced 8.5% interest rate in March for 2019-20, it has not been credited to the subscribers account as yet. The finance ministry is yet to formally approve the rate of pay out. Though, around 3,500 crore 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 its earning from equity investments.

Equity investments:

The pension fund has invested over 1.03 trillion in exchange traded funds (ETFs) but it's 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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