EPFO Likely to Retain Interest Rate at 8.75% for Current Fiscal

EPFO has been paying 8.75% interest rate for the last two fiscals to its 5 crore organised sector subscribers. Retaining of the rate for the third year in a row might face resistance from the central trade unions, who are pressing for a 9% returns for the current fiscal.

The Employees’ Provident Fund Organisation (EPFO) is likely to retain the rate of interest at 8.75% for provident fund deposits for the current fiscal, sources in the labour ministry said.

EPFO has been paying 8.75% interest rate for the last two fiscals to its 5 crore organised sector subscribers. Retaining of the rate for the third year in a row might face resistance from the central trade unions, who are pressing for a 9% returns for the current fiscal.

However, a final decision on this would be taken at a meeting of the Central Board of Trustees (CBT), the apex decision-making body of the EPFO, tomorrow in Chennai. The CBT includes representatives from the government, employers and employees.

Sources said that the rates would most likely to be retained at the previous two years’ level considering the government’s proposal to bring down the rates of small savings with effect from April 1 to allow banks to reduce their lending rate in tandem with rate cuts by the Reserve Bank.

EPFO provides the rate of interest from its earnings on investment on formal sector workers’ fund without any assistance from the government. The income projection of the retirement fund body is upwards of R34,844 crore for the current fiscal. At this, EPFO would not have any problem to raise the rates to even 9% considering that it would still have R100-odd crore surplus.

Sources, however, said the finance ministry is not in agreement with the idea of raising the rates since it would have a lot of bearings on other savings schemes as well. The Finance Audit and Investment Committee of the EPFO had earlier recommended 8.95% rate of interest rate on PF deposits.

Source : financialexpress

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Interest Rate on EPF

Press Information Bureau 

Government of India

Ministry of Labour & Employment 

Interest Rate on EPF 

The Minister of State for Mines, Steel and Labour and Employment, Shri Vishnu Deo Sai has said that the government has declared 8.75% interest on Employees’ Provident Fund (EPF) for the year 2013-14. 

In a written reply in the Lok Sabha today, Shri Vishnu Deo Sai has said that return on EPFO fund cannot be compared with return on other Pension Schemes like New Pension Scheme (NPS). The declaration of the return on NPS is on the basis of the accounting policy prescribed by NPS which allows the Net Assets Value (NAV) to be declared on the basis of current market value of the investments, while EPFO follows the cost value of the investment for accounting its investment and return is declared on the basis of actual receipt of interest on the investments. The return on EPFO investments is fixed whereas the return on NPS is not fixed and fluctuates on daily basis depending on the prevailing market conditions. 

The Minister said that presently the funds of EPFO are invested as per the pattern of investment notified by the Government in November, 2013 wherein only investments in corporate debt and Government bonds are allowed. There is no provision for investments in equities. 

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Employees earning upto Rs 15,000 a month will soon come under the Employees’ Provident Fund (EPF)

Employees earning upto Rs 15,000 a month will soon come under the Employees’ Provident Fund (EPF) net, with the Narendra Modi government approving a hike in the threshold for mandatory PF savings from Rs 6,500 a month to Rs 15,000.

Though the Manmohan Singh government had approved the hike in the EPF threshold this February after years of deliberations, the change couldn’t be notified before the election code of conduct kicked in.

Another UPA decision to assure a minimum monthly pension of Rs 1,000 for members of the employees’ pension scheme run by EPFO, in its final weeks in office, was also not notified before the polls.

Ministry officials had sought a fresh approval on the salary ceiling hike from the new minister for labour and employment Narendra Singh Tomar.

“The minister has approved the higher salary ceiling for mandatory EPF savings, and we will issue a notification soon for it to become effective,” said a senior government official aware of the development.

The ministry is also learnt to be examining if the minimum Rs 1,000 pension promise is sustainable.

The finance ministry, which had approved the pension promise with great reluctance and several conditionalities, had only provided funds to finance the bonanza for 2014-15.

At a board meeting in February, officials had warned that the pension assurance may have to be rolled back next year as there was no funding support beyond the first year. But their concerns were over-ruled by the previous labour minister Oscar Fernandes, who was the board’s chairman.

The Employees’ Provident Fund Organisation or EPFO oversees the retirement savings of over 8 crore members at present and the number could go up sharply as those earning between Rs 6,500 and Rs 15,000 will come under its fold once the new rules are notified and implemented.

The EPFO’s present ceiling for statutory contributions is a mere Rs 6,500 per month – lower than the minimum wage prescribed across the country.

Twenty-four percent of an employee’s salary (up to the ceiling) is mandatorily deducted and parked with the PF office.

Source:http://articles.economictimes.indiatimes.com/2014-06-12/news/50536576_1_minimum-monthly-pension-provident-fund-organisation-epf

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Good news for Provident Fund A/c holders, Interest Rate on PF Deposits Raised to 8.75% for 2013-14

Retirement fund body EPFO Monday announced a hike in interest rate on Provident Fund deposits to 8.75 per cent for 2013-14, a decision that will benefit over 5 crore subscribers.

The interest rate on PF deposits in the previous financial year was from 8.5 per cent.

The decision to raise interest rate was taken by the Central Board of Trustees (CBT), the apex decision making body of the Employees' Provident Fund Organisaton (EPFO).

"We have decided to recommend to the government 8.75 per cent rate of interest for 2013-14 to its subscribers," Labour Minister Oscar Fernandes, who chaired the CBT meeting, told reporters here.

The EPFO's recommendations would now be vetted by the Finance Ministry. Once the ministry gives its concurrence to the decision, the interest would be credited into the accounts of subscribers.

Elaborating on the decision to raise PF rate, EPFO's Central Provident Fund Commission K K Jalan said: "We have estimated an income of Rs 25,048.55 crore for 2013-14. EPFO would require 25,005.41 crore for providing 8.75 pre cent rate of interest for this fiscal and leave a surplus of Rs 43.14 crore." 

EPFO also announced a 20 per cent increase on Employees' Deposit Linked Insurance Scheme, 1976 as an interim measure.

Under this scheme, the family of a worker can get a maximum sum assured of Rs 1,30,000 in case of his/her demise during the service period. After 20 per cent raise, the maximum amount would now be Rs 1,56,000.

CBT has also approved increasing minimum administrative charges for managing EPF Scheme, 1952 and EDLI Scheme to Rs 500 and Rs 200 per month from existing rate of Rs 5 and Rs 2, respectively.

These charges for non-functional firms having no contributory members is also increased to Rs 75 and Rs 25 per month respectively for the two schemes.

EPFO has a corpus of around Rs five lakh crore. 

When asked about EPFO's plans to improve investments, particularly Special Depositor Scheme (SDS) which earns just 8 per cent rate of return, Jalan said: "We will definitely take out money from SDS and invest in high yielding instruments. We will soon work on a proposal." 

On the Labour Minister's idea of deducing extra 10 per cent on basic wages by EPFO for providing housing to workers, the Central Provident Fund Commissioner said: "We will definitely work on the proposal. He has a lot experience." 

The CBT also initiated the process for selection of new multiple fund managers and constituted a committee to appoint a consultant for the purpose. At present, Crisil is providing consultancy services to the EPFO.

The trustees also asked the Finance, Investment and Audit Committee to look into the proposal which sought more freedom for EPFO to trade and exit investments besides allowing it to refrain from investing in bonds of states.

The board also reviewed the performance of its four fund managers since August, 2011. State Bank of India remained on the top by earning a return of 9.23 per cent on investments, followed by followed by Reliance Capital Asset Management at 9.19 per cent.

The other two fund managers, HSBC AML and ICICI Sec PD Ltd, earned 9.18 per cent each which was above the benchmark rate of 9.11 per cent.

EPFO also launched the electronic return facility for exempted establishments (private PF trusts). It will benefit over 3,000 exempted establishments which are now required to file their monthly and annual paper returns.

These establishments which are otherwise managing the provident fund trust on their own will now get the facility of electronically reporting about their work. This electronic return will replace the earlier monthly and annual paper returns filed by exempted establishments.

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Investment in equity market is risky, says Samirendra Chatterjee, EPFO chief

   NEW DELHI: Samirendra Chatterjee is one of the largest fund managers in the country and certainly the one who is most closely watched. After all, as the Central Provident Fund Commissioner, he is responsible for nearly five crore provident fund accounts and manages some Rs 3.5 lakh crore. Chatterjee spoke to TOI about the changes at EPFO, the interest rate scenario and why the entity is resisting investment in equities . Excerpts:

It is still very tough to deal with EPFO - you can't find how much money there is in your account and the paperwork is cumbersome. Is something being done?

   We are trying very hard to make the services to members transparent. We have already put online the position of updation of member accounts office-wise on our website. Very soon individual accounts balance too will be available online. For employers too we have simplified the process of filing statements. We have given them a software tool to enable them to download the returns from their salary bills, and send it to us in CDs so that our offices can upload it. Transfer settlements have also been computerized and are being sent electronically . There are some teething troubles because of the training it entails. But things are changing. We are taking one step at a time to ensure that services are made efficient to members.

You have started a process of streamlining of inoperative accounts. How has the response been?

   Every month we get about five lakh applications for withdrawal. There has been a 30-40 % increase in that figure , which I believe is because of the announcement that accounts that have been inoperative for three years or more will not be given interest beyond March 31, 2011. Though we will stop paying interests on these accounts, the capital will remain safe. So, even if someone from the family comes and makes a claim in future, with the required identity, we will make the payment.

How much money is lying like this?

   The estimate is around Rs 15,000 crore spread across 2.5-3 crore accounts. Some accounts have huge accumulations . We will invest this money but there will be no interest payment on accounts that are inoperative for three years.

How much difference will it make to the interest rate for the current year?

   It is difficult to estimate now since many will withdraw now, and others will consolidate their multiple accounts through transfers.

   As for this year's interest rate, it is still too early to say. Nearly 85% of our funds are already invested and returns will not be higher just because interest rates have gone up now. It is only 10-15 % on which we can hope to earn a little more, given the higher rates that are on offer at present . So, on Rs 1.8 lakh crore our returns are booked, on the incremental Rs 30,000 crore we may gain a little but it will not make substantial difference to what we earned last year (8.5%).

Courtesy; economictimes

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Employees’ Provident Fund – 9.5% notified as rate of interest

   Employees’ Provident Fund : 9.5% notified as rate of interest under rule 6(b) of Part A of Fourth Schedule – NOTIFICATION NO. 24/2011 [F.NO. 142/14/2010-SO (TPL)], DATED 13-05-2011 Rule 6(b) of Part A of Fourth Schedule to Income-tax Act, 1961 – Recognised Provident Fund – 9.5 per cent rate notified under rule 6(b) of part A of IVth Schedule – Supersession of Notification No. S.O. 2091(E), dated 26-8-2010

   NOTIFICATION NO. 24/2011 [F.NO. 142/14/2010-SO (TPL)], DATED 13-5-2011

   In exercise of the powers conferred by clause (b) of rule 6 of Part A of the Fourth Schedule to the Income-tax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) number S.O. 2091(E), dated the 26th August, 2010, the Central Government hereby fixes, with effect from the 1st day of September, 2010, 9.5 per cent., as the rate referred to in the said clause.

Source;taxguru

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