EPFO drops proposal to raise equity investment limit to 20% – Times of India

NEW DELHI: Retirement fund body EPFO on Saturday dropped at the last minute a proposal to hike investments in equities or equity-related instruments from the existing 15% to 20%.
The proposal, which had met with resistance from employees’ representatives and trade unions, was part of the agenda items scheduled to be taken up at the meeting of the EPFO’s central board of trustees but was dropped without citing any reason.
Discussions on how the retirement fund corpus should be invested have been held at the level of the EPFO advisory body, the Finance Audit and Investment Committee (FAIC), but the government felt the need for further deliberations in FAIC before a final decision is reached. The next meeting of the FAIC may be as early as next week, while the CBT is likely to meet at the end of September this year.
Sources said the question that the government is grappling with is whether this 15% should apply to the entire corpus of over Rs 18 lakh crore available with EPFO since the law came into being in 1952, or if the government should institute a mechanism, in a phased manner, to bump up investment in equity to reach the 15% limit. Though 15% is the upper limit for equity investments, at present, it only applies to a portion of the retirement corpus on an annual basis. “EPFO is unlike any other investment-oriented scheme since it must not only ensure sustained income but also safe, risk-free returns,” an official said.
Sources said the labour ministry will also examine, among other strategies, how the Pension Fund Regulatory Development Authority (PFRDA) handles equity investments for its corpus, even though it may be difficult to draw parallels since PFRDA, unlike EPFO, is a contributory fund where subscribers are informed about the risks involved.