The Finance and Investment Committee (FIC) of the Employees? Provident Fund Organisation?s Board of Trustees has sought clarifications from the government on the new investment pattern for retirement funds notified by the finance ministry in August 2008.
Committee members sought to know if the Centre intends to revisit the pattern in the light of the meltdown in global markets that began a month after it was notified.
The committee also decided to refer a decision on the EPF rate for 2009-10 to the entire Board.
As per EPFO?s earning estimates, an EPF rate of 8.50% can be supported. Unlike in recent years, when the government could pay 8.5% only after dipping into EPFO?s reserves, EPFO expects to have a surplus of Rs 6.40 crore even if the same PF rate is maintained in 2009-10.
In January 2005, the Finance ministry had allowed retirement funds to invest upto 5% in equities ? a proposal that was never accepted by the EPFO.
The new pattern allows equity investments of up to 15% and was notified by the Central Board of Direct Taxes earlier this month, so that retirement fund trusts that agree with it can start implementing it from April 1, 2009.
A decision on the new pattern was deferred by the Committee in its meeting on Thursday even as EPFO and labour ministry officials admitted that implementing the new pattern in toto would be difficult for the 57-year old organization. Central PF Commissioner K Chandramouli did not attend the meeting. Among the key issues pointed out by EPFO on the new pattern is that if equity investments are not allowed, as the EPFO?s central board of trustees has opposed it in the past, then the pattern is rendered ?highly inflexible.?
The new pattern allows investments upto 55% in central and state government securities, upto 40% in corporate bonds of at least three years tenure, upto 5% in money market instruments and upto 15% in stocks.
If equity investments are disallowed, EPFO has pointed out the ?upto? prefix in each of the other investment categories is rendered ?totally insignificant.?
It would be highly improbable to achieve the exact pattern at the end of the year.
Therefore, the committee suggested that the limit of investments in the government securities, corporate bonds and money market instruments should be kept as upto 55%, upto 55% and upto 10% respectively.
This would allow flexibility in making investment decisions for benefit of the funds and subscribers, the FIC observed.
