The rate on the workers’ providence fund was lowered to 8.1 percent for 2021-22 on Saturday by the workers’ providence fund organization (EPFO). Labor Minister Bhupender Yadav justified the pension body’s decision by referring to the prevailing international and market situation.
Let’s take a quick look at the whole development.
EPFO’s board of trustees today cut interest rates to 8.1 percent for 2021-22, the lowest rate since 1977-78, when it was 8 percent. The interest rate was 8.5 percent in 2020-21.
The decision was taken at the EPFO Central Supervisory Board meeting held in Guwahati.
Labor Minister Bhupender Yadav, in elaborating the council’s decision, said the interest rate became final, taking into account prevailing international conditions and the market situation.
“We made the recommendation of 8.1 percent interest after assessing the prevailing market situation and the international scenario. We also cannot take high-risk instruments because we need to keep social security and market stability in mind, which is why the decision was made ‘ said Mr Yadav.
The minister said that even after paying the 8.1 percent rate, EPFO is in surplus of about Rs 450 crore. Interest rates are set based on the pension fund body’s income on the deposits it has. While the corpus is up 13 percent, interest income is only up 8 percent.
Employee representatives wanted higher interest rates, but the Central Board of Trustees (CBT) agreed to 8.1 percent, PTI reported. The advice of the council will soon be sent to the Ministry of Finance.
Once the Treasury Department ratifies the board’s decision, EPFO will direct its field offices to transfer the interest income, calculated at the new 8.1 percent rate for 2021-22, to subscribers’ accounts. to add.
By March 2020, EPFO had cut the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20.
Provision-based savings are required under the Employee Provisions and Miscellaneous Provisions Act, 1952. At least 12 percent of an employee’s base salary is mandatorily withheld to be saved in the Provision Fund, while an employer contributes an equal amount .
The coronavirus pandemic has put a strain on EPFO’s revenues. EPFO delayed payments for 2019-20 and paid the interest in two installments, coming from two sources of its investments – 8.15% from debt investments and 0.35 percent from its equity portfolio.