EPFO- EMPLOYEES PROVIDENT FUND ORGANISATION trustees likely to fix rate of return at 8.5 %

EPFO trustees likely to fix rate of return at 8.5 per cent on September 4



EPFOCentral Board of TrusteesRetirement fund managerEmployees' Provident Fund Organisation



 Retirement fund manager EPFO's apex decision-making body, the Central Board of Trustees, will meet on September 4 to decide on the interest rate for depositors for 2010-11, which is likely to be 8.5 per cent.



"The CBT headed by Union Labour Minister would meet on September 4, where trustees would take up the issue of fixing the interest rate for depositors for the current fiscal," an Employees' Provident Fund Organisation (EPFO) source said.



Earlier, on April 9 this year, the Employees' Provident Fund Organisation's (EPFO) trustees had deferred a decision on interest rates following pressure from trade unions.



The employees' representatives demanded in the meeting to raise the rate of return on provident fund deposits to 9.5-10.5 per cent from 8.5 per cent.



The EPFO's key advisory body, the Finance and Investment Committee (FIC), had recommended an 8.5 per cent interest rate for 2010-11 — which the depositors have been getting for the past five years since 2005-06 — at meeting held on February 26 this year.



The FIC recommendations are usually accepted by the CBT. The committee had said that maintaining an 8.5 per cent interest rate would leave a surplus of Rs 15.26 crore.



FIC had also indicated that increasing the rate to 8.75 per cent for the next fiscal would result in a huge deficit of Rs 426.53 crore.



The employees' representatives, including Hind Mazdoor Sabha (HMS) Secretary A D Nagpal and Bharatiya Mazdoor Sabha (BMS) Secretary B N Rai, had expressed reservations about fixing the rate of return at 8.5 per cent for six years in a row.



They had argued that rate of return is decided after taking into account conservative advance income estimates for a financial year in the committee's meeting on February 26 this year.



They had also asked to place a statement showing the last five years' actual and projected income from the EPFO's huge corpus of Rs 2.57 lakh crore.



The EPFO has estimated an income of Rs 15,036 crore in 2010-11 and maintaining an 8.5 per cent interest rate for the next fiscal means an interest payout of Rs 15,020.80 crore and a surplus of Rs 15.26 crore. Maintaining a 9 per cent return would result in a deficit of over Rs 868 crore.



The retirement fund manager maintained an interest rate of 9.5 per cent for three consecutive financial years between 2002 and 2005. Prior to that, the EPFO provided a return of 11.25 per cent for 2001-02.



The EPFO maintained its highest rate of return of 12 per cent for more than a decade between 1989-90 and 1999-2000. Interestingly, when the EPFO started operations, it gave a return of just 3 per cent in 1953-54.

courtesy,ET