Non-unionized workers may also soon be able to invest in EPFO’s pension scheme, report says

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The EPFO ​​pension scheme is likely to be open to non-union workers too, regardless of their monthly income, according to a report by Financial Express. From now on, contribution to the Employees Provident Fund (EPF) is compulsory for organized workers earning more than Rs 15,000 per month.

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

A retirement pension, a child’s pension, a widow’s pension and a disability pension will also be paid under the proposed scheme. However, the minimum period of eligibility for pension benefits will be increased from 10 years to 15 years. It will have a provision to provide the pension to the family in the event of the death of the EPFO ​​member before the age of 60.

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

The current interest rate for the EPF scheme is 8.1%. The government has ratified an interest rate of 8.1%, the lowest in four decades, on employee provident fund deposits for 2021-22. The decision impacts about five crore subscribers of the Employees Provident Fund Organization (EPFO).

In March, the EPFO ​​had decided to pay an interest rate of 8.1% on the amount of the EPF for 2021-22, against 8.5% previously. The EPF interest rate of 8.1% is the lowest since 1977-1978, when it was 8%.

The forecast EPF interest rate for 2019-20 was the lowest since 2012-13, when it was reduced to 8.5%. The EPFO ​​had offered an interest rate of 8.65% to its subscribers in 2016-2017 and 8.55% in 2017-2018.

The interest rate was slightly above 8.8% in 2015-2016. It had granted an interest rate of 8.75% in 2013-14 and 2014-15, higher than the 8.5% of 2012-13. The interest rate was 8.25% in 2011-2012.

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

EPFO invests 85% of its corpus in debt securities and 15% in ETFs, in accordance with the investment scheme notified by the government. Investment in ETFs is made based on Nifty, Sensex, Central Public Sector Enterprises (CPSE) and Bharat-22 indices.

In the current financial year to June, a total of Rs 12,199.26 crore has been invested in ETFs, out of a 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 a total investment of Rs 2,89,930.79 crore.

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