Employee Provident Fund interest may be hiked to 8.8%

The Employees’ Provident Fund Organisation is likely to add to the festive cheer by announcing an 8.8 per cent return on retirement savings for 2012-13, significantly higher than the 8.25 per cent set for the previous financial year.

“Our calculations work out to a 8.6 per cent return for 2012-13. But there is tremendous pressure and expectation from the EPFO, and we could take it up to 8.8 per cent to match the interest rate on Public Provident Fund,” a senior PF official said. The increased payout will be possible by using returns on inoperative accounts, which have deposits of Rs 22,000 crore, the official said.

The Central Board of Trustees, the apex decision-making body of the EPFO, is expected to meet by early next month to take a final call. No date has been set, but sources said the board will have to meet soon to also consider the EPFO’s annual report, which must be tabled in Parliament’s winter session beginning November 22.

“Interest of 8.6 per cent is not acceptable when other schemes like PPF are giving higher returns. We will pitch for at least an 8.8 per cent return, if not 9 per cent,” a CBT member said.

The EPFO, which manages a corpus of over Rs 3.5 lakh crore, was faced with a deficit last fiscal and was forced to announce a drastic rate cut of 1.25 percentage points from the 9.5 per cent return it offered in 2010-11.

Source: Indian Express