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 This means that the money invested in equity in the first year is withdrawn in the fourth year so that the money remains invested for a long time and can get good returns.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 In this, till March 31, 2022, EPFO ​​had withdrawn Rs 22,000 crore.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.

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The Employees’ Provident Fund Organization (EPFO) may approve a proposal to increase the investment limit in shares and related investment products from the existing 15 per cent to 20 per cent. The proposal is likely to be approved in the meeting of EPFO ​​trustees to be held on July 29 and 30. At present, the EPFO ​​can invest five per cent to 15 per cent of the investment eligible deposits in equity or equity related schemes.

Investment limit can be made up to 20%

The proposal to increase this limit to 20 per cent has been considered and approved by the Finance Audit and Investment Committee (FAIC) of EPFO. The recommendation of FAIC will be placed before the Central Board of Trustees (CBT), the apex decision making body of EPFO, for consideration and approval. According to a PTI report, the source said that the Central Board of Trustees, headed by the Union Labor Minister, may approve an increase in the investment limit in equity and equity related schemes of FAIC from the existing five to 15 per cent to 20 per cent.

In a written reply to a question in the Lok Sabha, Minister of State for Labor and Employment, Rameshwar Teli on Monday said that the FIAC, a sub-committee of the CBT, has recommended to consider raising the equity and equity related investment limit from 5-15 per cent to 5-20 per cent. .

Investment in

ETF

s was approved in August 2015

EPFO had approved investment in Exchange Traded Funds (ETFs) in August 2015. At that time, five per cent of investible deposits were invested in equity-linked products. For the current financial year, it has been increased to 15 percent.

Teli also said that EPFO’s return on equity related investments has increased to 16.27 per cent in 2021 from 14.67 per cent in 2020-21. However, trade unions have been opposing EPFO’s investment in the stock market. The reason for this is that there is no government guarantee on this investment.

Apart from this, let us tell you that in this meeting a decision can be taken regarding the formation of Central Pension Disbursal System. 73 lakh pensioners will get the benefit of this and pension can be transferred to everyone’s account simultaneously. At present EPFO ​​has 138 regional offices. All these offices give benefit to the beneficiaries in their pension account according to their own. In such a situation, pensioners get pension on different days and at different times.

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