PF Interest: Employees’ Provident Fund Organization (EPFO) subscribers can get more interest in the coming times. EPFO is now going to change its investment strategy for higher returns.
The Finance Investment and Audit Committee has proposed setting a limit of 10 per cent return for profit booking in equity investment made through Exchange Traded Funds (ETF).
Not only this, to take advantage of the fluctuations in the stock market, instead of withdrawing the money invested in ETFs in lump sum, the committee has also suggested to redeem ETFs repeatedly. This means that EPFO will redeem the ETF only if the annual return is 10% or more. It will be implemented once it is approved by the Central Board of Trustees (CBT) of EPFO.
According to a media report , a member of the EPFO board told that this will bring transparency in the redeemed policy as well as increase the returns. Equity is getting more returns than debt and other investment options. In view of this, EPFO is now changing its investment strategy. The Labor Ministry is also in favor of more equity investment.
15 percent is equity investment
EPFO invests 15 percent of its total fund in ETF. EPFO also plans to increase the investment period in ETFs to 5 years instead of 4. An official said that EPFO’s plan is to get good returns from the ups and downs of the stock market. That’s why the money invested in ETFs has to be redeemed on a daily basis instead of being redeemed in lump sum on getting 10% return or more.
The policy of withdrawing money will change
At present, EPFO redeems equity on the basis of ‘first in, first out’. This means that the money invested in equity in the first year is withdrawn in the fourth year so that the money remains invested for a long time and can get good returns. The Ministry of Labor believes that investing in equity has now become necessary to give more returns to EPFO members. This is because the rate of return is falling in debt and other investment options.
1.5 lakh crore annual equity investment
EPFO started investing in equity in 2015-16. In the first year it invested 5 per cent of its funds in equity and in the second year 10 per cent. Due to this, 15 percent of the fund was invested in equity in the next year. Its total investment of Rs 1.7 lakh crore was done in equity. In this, till March 31, 2022, EPFO had withdrawn Rs 22,000 crore. EPFO invests around Rs 1.5 lakh crore in the stock market every year.