PF Update: Unorganised Workers Might Also Be Able To Invest In EPFO Pension Scheme Soon, Says Report

The EPFO‘s pension scheme is likely to be open for unorganised workers also irrespective of their monthly income, according to a Financial Express report. As of now, the employees’ provident fund (EPF) contribution is mandatory for those organised workers earning above Rs 15,000 per month.

The new scheme, likely to be named Universal Pension Scheme (UPS), is proposed to be based on individual contribution and ensure that each worker gets a minimum pension of Rs 3,000 a month after attaining the age of 60 years, according to the report.

Superannuation pension, children pension, widow pension and disability pension will also be provided under the proposed scheme. However, the minimum qualifying period of service for pension benefit will be increased from 10 years now to 15 years. It will have a provision to provide the pension to the family in case the EPFO member dies before the age of 60.

“The minimum accumulation of about Rs 5.4 lakh is required for a minimum of Rs 3,000 pension per month. Members can choose to contribute more voluntarily and accumulate significantly larger amount for a higher pension,” according to the FE report quoting an ad-hoc committee, set up by the Central Board of Trustees (CBT), the EPFO’s highest decision-making body.

The current interest rate on EPF scheme is 8.1 per cent. The government ratified a four-decade-low interest rate of 8.1 per cent on employee provident fund deposits for 2021-22. The decision impacts about five crore subscribers of the Employees’ Provident Fund Organisation (EPFO).

In March, the EPFO had decided to pay an interest rate of 8.1 per cent on EPF amount for 2021-22, compared with 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it stood at 8 per cent.

The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5 per cent. EPFO had provided an 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18.

The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than the 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.

EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The scheme, which is managed under the aegis of the EPFO, covers every establishment in which 20 or more persons are employed.

The EPFO invests 85 per cent of its corpus in debt instruments and 15 per cent in ETFs, as per the investment pattern notified by the government. The investment in exchange-traded funds is made based on Nifty, Sensex, central public sector enterprises (CPSEs) and Bharat-22 indices.

In the current financial year up to June, a total of Rs 12,199.26 crore has been invested in ETFs, out of the total investment (debt and equity combined) of Rs 84,477.67 crore. In 2021-22, Rs 43,568.02 crore was investment in ETFs, out of the total investment of Rs 2,89,930.79 crore.

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