Retirement fund manager Employees’ Provident Fund Organization (EPFO) will announce the 2017-18 provident fund interest rate for over 50 million subscribers on Wednesday after a meeting of its Central Board of Trustees (CBT).
Here are four things to look out for:Read more ↓
Interest rate: The EPFO is likely to announce a payout of 8.65% in 2017-18. The pension fund has already sold a portion of its equity investments and garnered Rs1,054 crore of capital gains to ward off any shortfall in earnings to pay 8.65% interest rate.
However, there is constant pressure from the finance ministry that EPF rate needs to go down as small savings schemes, including Public Provident Fund, are paying much less. Since EPFO does not get any funds from the government, and manages its rate depending on its earnings from investments, it may not succumb to pressure to lower the rate. But in a market where debt investment earnings are low, authorities feel there is still a 20% chance of an interest rate cut.
Equity investment: The CBT is expected to discuss a proposal on how it wants to disburse exchange-traded fund (ETF) units to its subscribers as a majority of its subscribers are not financially literate enough. It may also bring in a differential equity allocation plan and bring in choice for subscribers on how much they wish to invest. Currently, 15% of annual EPF savings are invested in equity market through ETFs and the rest goes to the debt market.
NPS-EPF portability: The pension fund is also likely to table a proposal to amend the EPF and Miscellaneous Act to allow one-time opportunity to EPF subscribers to migrate to the National Pension System (NPS). The interoperability plan between NPS and EPF is pending since 2015.
Budget proposal on EPF for women: Besides, the EPFO may take up the budget proposal allowing first-time female employees to contribute 8% to EPF instead of the current mandatory deduction of 12%. The central board approval is a must for effecting any change in the EPF contribution. Currently, an employee contributes 12% of his or her basic salary as statutory monthly contribution to EPF and the same contribution is made by the employer. The budget announcement will mean that while employers’ contribution of 12% will continue, new women employees will be required to pay just 8% of their salary as EPF contribution.
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