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  1. Eyeing better market returns, EPFO may hike equity investment limit to 25%

Eyeing better market returns, EPFO may hike equity investment limit to 25%

As returns from debt investments remain low, EPFO is mulling over a plan to hike equity investment limit to 25 percent. Employees with higher salaries may be allowed to park 25 percent of their contribution into the equities.

By: | Updated: February 16, 2018 11:52 AM
Already EPFO has sold ETFs worth Rs 2,886 crore earlier this month. (Image: Reuters)

As returns from debt investments remain low, EPFO is mulling over a plan to hike equity investment limit to 25 percent, Mint reported citing an unidentified source. Employees with higher salaries may be allowed to park 25 percent of their contribution into the equities and for employees with at lower salary bracket 15 percent cap is likely to be retained. EPFO accounts for yearly accruals of over Rs 1.2 trillion and holds Rs 11 trillion of total assets under management. At present, National Pension Scheme (NPS) subscribers can invest up to 50 percent of their salary contribution into the equities. If this proposal sees the light of the day, the retirement fund body EPFO can take on the competition offered by the NPS in a much better way.

Already EPFO has sold ETFs worth Rs 2,886 crore earlier this month. A total of Rs 44,000 crore has been invested in the ETFs by the EPFO till date. The investments have earned 16 percent return up till now. Since August 2015, EPFO has been making investment in the ETFs. The retirement fund body went ahead with monetisation of the investments made by it in the ETFs after the CAG objected to the notional gains. As per the report by The Indian Express, The cash flow arising after offloading the ETF units will be a part of the profit to evaluate the interest rate.

EPFO may keep interest rates unchanged at 8.65 percent on provident fund for its 5 crore subscribers for 2017-18 as its trustees are scheduled to meet on February 21, 2018, The Indian Express reported. In 2016-17, EPFO announced 8.65 percent interest rate on deposits that was a bit lower as compared to 8.8 percent in 2015-16. The EPFO trustees, in their meeting on February 21, also review the proposal to credit the ETFs in the provident fund accounts of the subscribers when they make exit from the fund. There is also a proposal to offer options to the subscribers to have ETF credits in their account.

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