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Business
21 Feb 2018

EPFO to announce provident-fund interest today: Here's all about it

EPFO to announce provident fund interest-rate for 2017-18

The Employees' Provident Fund Organization (EPFO) is going to announce the provident fund interest rate for its five crore subscribers for 2017-18 after a meeting of its highest decision-maker, Central Board of Trustees (CBT).

Previous reports suggested EPFO might lower the interest rate from 8.65% to 8.5%. But latest reports claim the retirement-fund body will retain the same 8.65% rate.

Here's all about it.

In context

EPFO to announce provident fund interest-rate for 2017-18
EPFO likely to announce 8.65% interest rate for FY18

Interest Rate

EPFO likely to announce 8.65% interest rate for FY18

The EPFO is likely to pay an interest rate of 8.65% in 2017-18, according to PTI. It has reportedly sold a part of its equity investments worth Rs. 1,054cr to prevent any earnings shortfall for paying 8.65% interest rate.

Even for 2016-17, EPFO paid 8.65% interest rate to its subscribers; this was, however, lower compared to the 8.8% in 2015-16 and 8.75% in 2013-15.

Rate Cut?

Only a 20% chance of EPF rate cut: Experts

EPFO retaining 8.65% interest rate would be good news for its subscribers. However, Finance Ministry has been pressurizing it to lower the rate as other, small savings schemes like Public Provident Fund, still pay much less.

But EPFO isn't funded by the government; its rate depends on its earnings from investments. So, experts say EPFO is unlikely to succumb to the Ministry's pressure.

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CBT decides EPF interest rate

The EPFO's CBT traditionally decides the interest rate on the provident fund before the year ends. A higher interest rate will benefit the EPFO's more than five crore subscribers. The retirement fund body currently manages a retirement corpus of over Rs. 11 lakh crore.

Crediting ETFs directly into members' EPF accounts

Equity Investment

Crediting ETFs directly into members' EPF accounts

CBT may also discuss the disbursement of its exchange-traded fund (ETF) units to subscribers and review a proposal to credit the ETFs to the subscribers' EPF accounts as most members aren't financial literate.

It might implement a differential equity allocation plan, giving subscribers a choice on the amount they want to invest. Currently, 15% of their annual EPF savings are invested through ETFs.

EPFO invested Rs. 44,000cr in ETFs

EPFO started investing in exchange-traded funds since Aug'15; it has invested more than Rs. 44,000cr in the ETFs till date and has reportedly earned a return of 16%. However, the organization has not monetized its ETF investments yet.

Women Employees

EPFO to take up budget proposal on women employees' EPF

The EPFO may also discuss the Budget 2018 proposal for allowing first-time female employees to contribute only 8% to EPF instead of the existing, mandatory 12% deduction.

The central body's approval is required for making any changes in the EPF contribution.

While the budget proposed an 8% EPF contribution of the basic monthly salary for new women employees, the employers' contribution will remain 12%.

One-time opportunity for EPF subscribers to migrate to NPS

The retirement fund body is also expected to present a proposal for amending the Employees Provident Fund & Miscellaneous Provisions Act to give the EPF subscribers one-time portability to the National Pension System (NPS). The NPS-EPF interoperability plan is pending since 2015.

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