The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) has recommended an 8.5 per cent annual rate of interest to its members’ accounts for 2020-21. A meeting of the CBT held in Srinagar on Thursday decided to send their proposal to the Union Finance Ministry. 

The interest rate would be officially notified in the government gazette, following which the EPFO would credit the rate of interest into the subscribers’ accounts, the government’s media release has said. The release has added that the EPFO has consistently generated returns of not less than 8.50 per cent since 2014-15.

“A high EPF interest rate, along with compounding, makes a significant difference to gains of subscribers. This is even though EPFO has consistently followed a conservative approach towards investment, emphasising the safety and preservation of the principal-first approach. The risk appetite of EPFO is meagre since it involves investing poor man’s retirement savings also,” the release has added.

Since 2015-16, EPFO has been investing in equities through exchange-traded funds based on the NSE 50 and the BSE 30 indices. Investments in equity assets started at 5 per cent in FY15 and subsequently rose to 15 per cent of the incremental portfolio. 

For FY21, EPFO decided to liquidate investments in equities, and the recommended interest rate is a result of combined income from interest received from debt investment and income realised from equity investments. This has allowed EPFO to provide higher returns to its subscribers while still maintaining a healthy surplus to act as cushion for providing higher return in future. There is no overdraw on EPFO corpus due to this income distribution, the release has said.