In a move to get better returns, the Employees’ Provident Fund Organisation’s (EPFO) will invest a part of the retirement fund corpus in the capital market from August 6, through exchange-traded funds (ETFs), said Central Provident Fund Commissioner KK Jalan.
“We are going with our fears and our expectations and we assure you that we are going in,” he said at an Assocham event here on Friday. A decision on the exact amount to be invested will be taken soon, he added.
Some reports said that initially ₹6,000 crore will be invested in ETFs. During the April-June period, the EPFO’s monthly incremental deposit was around ₹8,200 crore, leaving about ₹410 crore at its disposal to invest in ETFs every month. SBI Mutual Funds will help with the investment.
According to Finance Ministry norms, the EPFO can invest up to 15 per cent in the market, but the tripartite Central Board of Trustees allows only up to 5 per cent to begin with, Jalan said. In April, the Labour Ministry’s new investment pattern for the EPFO allowed it to invest a minimum of 5 per cent and up to 15 per cent of its funds in equity or equity-related schemes.
Jalan said: “We are long-term players and in the long term, usually the equity market behaves in a positive manner,” adding that the “risk element of equity going down is always there and that the risk element is very, very less because it is only 5 per cent of the incremental market.”
Premature withdrawalsJalan said the EPFO proposes capping premature PF withdrawal at 75 per cent of the total deposit, with 25 per cent to be paid at the age of 58. At present, subscribers can withdraw the entire amount prematurely by showing themselves to be “not employed anywhere” for two months.
The EPFO, according to a Lok Sabha reply, has 11.78 crore members, with the total number of pensioners under the pension scheme at 46.91 lakh.