The Employees Provident Fund Organization (EPFO) will pay 8.5 percent interest to its subscribers for 2019-20, as committed. However, this will be paid in two installments of 8.15 percent now the rest 0.35 percent in December with arrears as the earnings of the retirement fund body has taken a hit during the Covid-19 pandemic.
The board has also given its go ahead to increase the upper limit of payout under its deposit linked insurance scheme to Rs. 7 lakh as against Rs. 6 lakh while a proposal by EPFO to run a separate pension scheme for its subscribers met with resistance from employees’ representatives. The proposal will again be considered in the next meeting of the EPFO in December.
The finance ministry had on a few occasions sought a reduction in the rate, but had generally followed the board’s recommendation. The EPFO had in March declared the interest rate for 2019-20 at 8.5 percent, down from 8.65 percent the year before, affecting the retiral savings of its subscribers.
According to media reports, the board, however, deferred its proposal to allow high-paid employees to contribute more to the pension corpus and linking the payout to individual contribution.
Under the existing formula, pension contribution goes to a common pool and earning from it, decides pension outgo based on a formula instead of individual contribution. Currently, an employee pays 12 percent to the EPFO and the employer makes a matching contribution every month as statutory deduction from salary. Of the employer's 12 percent contribution, 8.33 percent goes to pension corpus on a salary threshold of Rs. 15,000.