Jayant Sinha wants 15% EPFO investment in equity

Minister asserts that SIPs and average costing approach generate best returns for long-term investors

Pitching for an increase in Employees Provident Fund Organisation (EPFO) investment in the equity market to 15 per cent of its corpus, minister of state for finance, Jayant Sinha said people's retirement savings should reap the benefit of such investments in the long run.

He said it had been established that systematic investment plans and the average costing approach generate the best returns for long-term investors. "The benefit of average costing should be available to people saving for retirement because the equity markets will go through ups and downs," he said on Thursday on the sidelines of an event here. "There will be bull markets and there will be bear markets, but if you follow an average costing approach, you will be building your own position in the market at appropriately low cost when the market is down."

The finance ministry has allowed EPFO to invest up to 15 per cent in equities but the latter has said it will only invest up to five per cent. It had entered the equity market in August 2015 for the first time, through the exchange-traded fund route with an initial corpus of Rs 5,000 crore. The investment was made through SBI Mutual Fund's two index-linked ETFs, one to the BSE's Sensex index and the other to the NSE's Nifty.

EPFO manages a corpus of Rs 8.5 lakh crore and is expected to receive incremental deposits of Rs 1.2 lakh crore this financial year.

The minister also pitched for access to the full range of pension products. "We need to make sure our investors, who are saving for retirement, have access to a full range of pension products... such as venture capital and private equity which have generated very strong real returns around the world," he said.

Sinha also said there is a need to add more people under the pension system from the unorganised sector.