The Union finance ministry has recommended a cut in the Employees’ Provident Fund Organisation (EPFO) rate upward of 50 basis points, weeks after the pension fund body decided on 8.65% interest for its subscribers.
The latest recommendation to the Union labour ministry also comes amidst efforts to raise the salary ceiling of its mandatory coverage to ensure more workers get retirement benefits.
The finance ministry, which had earlier raised doubts about the tenability of 8.65% interest rate on the pension fund of retired employees, has again sought a cut in the rate as it has to bear the liability if the EPFO can’t pay from its own fund.
The labour ministry, which wants to increase the exposure to stock markets, has so far justified the 8.65% interest rate.
The EPFO trustee board, which will meet on April 12, is likely to approve a proposal to invest 15% of the EPFO fund in stock market, from the current ceiling of 10%. India’s state pension fund will also raise the salary to include more people under the retirement benefit schemes.
The proposal says people earning a basic salary of below Rs 25,000 a month will be mandatorily covered under the pension plan. Currently, workers earning less than Rs 15,000 a month are eligible for the provident fund.
“We are raising the ceiling to offset inflationary factors. Nearly one crore (10 million) additional workers will get the retirement benefit if the ceiling is raised,” an EPFO official said.