Cool Title but what is the news?
A good news for you! Retirement fund body Employees’ Provident Fund Organisation (EPFO) has decreased interest rate on deposits to 8.55 percent for the financial year 2017-18. In the words of labour Minister Santosh Kumar Gangwar, this decision was taken by EPFO’s central board of trustees at its 220th board meeting on Wednesday. It came as a surprise, seeing the previous year records. Earlier, EPFO had announced an interest rate of 8.65% for 2016-17 and 8.8% in 2015-16.
Okay, but what does it mean?
This is a great step, which will benefit many people. Statistically, this move will affect around six crore subscribers. Moreover, it would leave EPFO with a surplus of Rs 586 crore against Rs 695 crore in the previous fiscal year. The interest rate decided by the central board of trustees will have to be examined carefully by the finance ministry. Once that happens, it would be published. Previously this year, EPFO earned a profit of Rs 1,100 crore by selling equity shares in the market worth Rs 3,700-crore. Due to this, they felt that the retirement fund body could retain the interest rate for the present fiscal year at 8.65%.
Why should I care?
The bigger picture:
However, this wasn’t an easy task. According to the labour minister, the money has been used to purchase securities at higher rates. Also, this isn’t the first surprise that the ministry treated the people with. Last month, the FM reduced the interest rate on General Provident Fund (GPF) and Public Provident Fund (PPF) to 7.6%. It was to be effective from January 1, 2018, much below the returns on provident fund deposits. This decision has increased the distance and has made PF more profitable option for employees. Besides, EPFO has earned a cumulative return of 20.65% on its equity investment till December.
For you personally:
This decision is primarily taken to increase the number of subscribers. Our Labour ministry has predicted that it would add another 3 crore to its subscriber base. However, this would require an amendment to the The Employees’ Provident Funds And Miscellaneous Provisions Act.
“Besides, we have reduced the administrative charges from 0.65% to 0.5% to ensure that the benefits of savings and efficiency of EPFO are passed on to the employees,” said Gangwar after nearly four-hourlong meeting.
All in all, this decision has been taken for our benefit. Let’s see what more the ministry has in store for us!
Source: Economic Times