With high inflation eating into workers’ savings, trade union leaders who dominate decision making at the Employee’s Provident Fund Organisation have demanded a 9 per cent return on retirement savings for FY14 even as the organisation wants to continue with 8.5 per cent.
The issue will be taken up when the EPFO’s apex decision making body — the Central Board of Trustees meets on January 13, after a gap of 11 months.
“With high inflation and high interest rates, the government should also offer a higher return on PF deposits,” said AK Padmanabhan, member, CBT and president, Centre of Indian Trade Unions.
“There has to be some increase in PF rates to protect the value of the workers’ savings,” says another leader.
In last fiscal year, the EPFO offered an 8.5 per cent return on the provident fund deposits of workers in the private organised sector. In 2013-14, the EPFO is estimated to have earned Rs 20,796.96 crore of which Rs 20,740 crore will be used to pay 8.5 per cent interest to its subscribers.
An 8.5 per cent interest would leave the retirement fund manager with just about Rs 57 crore surplus in 2013-14 while even a 50 basis point hike would require an additional Rs 1,000 crore in the fiscal.
“We would have liked to pay a higher interest rate to subscribers who are already reeling from high inflation but it has to be in proportion with our returns,” said a senior EPFO official.
Apart from the interest rate, the Trustees in the first such meeting this fiscal, are also expected to take up a host of proposals including a revamped investment pattern for the EPF.
The new pattern, which is based on the finance ministry’s investment pattern for pension and provident fund trusts, 2008, envisages raising the cap on investments in PSU and private sector corporate bonds to 55 per cent but has refrained from investing in equities.
Though the labour ministry has already notified the investment pattern, hike in investment in corporate paper has to be ratified by the CBT. Under the new pattern, the EPFO can also invest up to 55 per cent of its Rs 6 lakh crore corpus in government securities while up to 5 per cent can be put in money market instruments including units of mutual funds.
PF enrolment records slowest growth in 3 years
New Delhi: The coverage of the Employees’ Provident Fund