PPF that is offering a return of 8.7 per cent in 2013-14 from its earlier interest rate of 8.8 per cent in 2012-13.
But do note that unlike, the slightly stricter withdrawal rules of the EPF, the PPF allows you to withdraw from the fifth year of contributions and the account matures in its 15th year that can be extended by a block of five years.
However, with retail inflation at nearly 10 per cent, the rate of interest on all such savings instruments is below the inflation level and concerns over erosion of the value of your investments are very real.
A word of caution: Salaried employees who wish to withdraw their PF contributions and avail the higher rate of interest of 8.75 per cent must wait for the final notification from the finance ministry. For those withdrawing their savings before this, the EPFO will calculate the 8.5 per cent interest rate for the previous fiscal.
In this regard, trade union leaders have sought a higher return on EPFO contributions and may even seek support from the finance ministry that has to finally approve the interest rate and notify it.
“There must be some relief for workers who are suffering from high inflation and they must get a higher interest on their retirement savings,” said AK Padmanbhan, president Confederation of Indian Trade Unions, who is a member of the EPFO’s Central Board of Trustees that recommends the interest rate.
But the EPFO is bound by its norms that do not allow for a higher interest rate to subscribers than the actual income of the fund. “We have estimated an income of Rs 25,048.55 crore for 2013-14. EPFO would require Rs 25,005.41 crore for providing 8.75 per cent rate of interest for this fiscal and leave a surplus of Rs 43.14 crore,” said KK Jalan, central PF commission.
Apart from the PF, investors have other obvious choices such as the recently launched inflation-indexed bonds that promise to give a higher return. Though these bonds are taxable like fixed deposits, but their return would be higher.
The ten-year bonds, offer interest in two