Your EPF investment could get you higher returns soon

Employees Provident Fund Organisation ( EPFO), the retirement fund body , is exploring changes to its investment mix to pump in more funds in state government securities and AA+ rated instruments, rated by two agencies, as it seeks to earn higher returns for its subscribers and offset the impact of declining interest rates.

Central Provident Fund Commissioner (CPFC) VP Joy , who heads the fund that has a corpus of around Rs 10 lakh crore, said EPFO always tries to explore ways to enhance returns within government guidelines. “When interest rates are falling, we also look for opportunities where we get higher returns. That is why EPFO put some money in equities.We increased equity investments ( ETF) to 15% from 10% in an incremental way ,“ Joy old TOI. This means, EPFO will park around Rs 22,500 crore in exchange traded funds (EPF) during the current financial year after the approval of the Central Board of Trustees (CBT) to enhance investments in equity r equity-linked schemes.

The EPFO had invested round Rs 1.5 lakh crore in 2016-17 and the investible deposits are estimated to remain around the same level this year too. EPFO has invested Rs 23,000 crore in ETFs so far and the annualised return on these investments has been over 12%.



The retirement fund body has an investment mix of government securities, state loans, corporate bonds and others like Special Deposit Scheme (SDS). However, the EPFO earns returns of less than 8% on some of its investments, particularly government bonds and schemes.

CPFC said EPFO is also exploring to invest some money in state government securities, which will offer a little higher return (around 30 basis points more) than what it get by investing in central government securities.

CPFC said the basic principle of investment always involves a trade-off between risk and returns and for higher returns, one must be prepared to take little bit more risk. “Second principle of investment is you should not put everything in one basket, you should diversify,“ Joy added.

Joy also said EPFO has embarked on a plan to promote housing in the country as members can now repay their home loans using their provident fund contributions. “EPFO has signed an MoU with Hudco for its members. If individual members take housing loans, such loans can be repaid from instalments of EPF."