EPFO fixes 8.5% interest on EPF deposits for 2020-21

There were speculations that the EPFO would lower interest on provident fund deposits for this fiscal

The Employees' Provident Fund Organisation (EPFO) on Thursday decided to retain an 8.5% annual rate of interest to be credited on provident fund deposits for the current financial year.

The decision was taken at a meeting of the EPFO Central Board of Trustees in Srinagar chaired by Union Labour Minister Santosh Gangwar, an official statement said.

"The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into the subscribers’ accounts," it said.

Now, this decision will be sent to the Ministry of Finance for concurrence following which it will be notified.

"For FY 2021, EPFO decided to liquidate investment in and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realised from equity investment," the statement said.

This has enabled EPFO to provide a higher return to its subscribers and still allowing EPFO with a healthy surplus to act as a cushion for providing a higher return in the future also. There is no over-drawl on EPFO corpus due to this income distribution, it added.

The statement also said the EPFO has consistently generated returns not less than 8.5% since FY 2014.

"A high EPF interest rate along with compounding makes a significant difference to gains of subscribers. This is despite the fact that EPFO has consistently followed a conservative approach towards investment, putting highest emphasis on the safety and preservation of principal first approach. Risk appetite of EPFO is very low, since it involves investing poor man’s retirement savings also," it added.

It also said that over the years, the EPFO has been able to distribute higher income to its members, through various economic cycles with minimal credit risk.

"Considering the high credit profile of the EPFO investment, the interest rate of EPF is considerably higher than other comparable investment avenues available for subscribers. During the period from 2015-16 EPFO prudently started investing in equity through exchange traded funds based on the NSE 50 and BSE 30 indices. The investment in equity assets started from 5% for FY 2015 and subsequently went up to 15% of the incremental portfolio," it added.