EPFO subscribers may get the choice of where and how much to invest

If a new labour ministry policy gets the green light, you will have the flexibility to select an investment pattern for your PF kitty to maximise returns

Want the freedom to decide where and how much to park your provident fund (PF) savings --- whether that is in equity, debt or a combination of the two? You might just get what you asked for as the labour ministry has prepared a draft policy that will remove the existing cap on investments, the Economic Times reported on Friday.  

If the policy gets the green light, you will have the flexibility to select an investment pattern of your own to maximise returns, added the report.   

Here's what the draft policy will mean for EPFO subscribers

1) The policy will give the Employees' Provident Fund Organisation's (EPFO's) subscribers the flexibility that is enjoyed by the National Pension Scheme's (NPS') active subscribers, according to the financial daily.

2) At present, NPS' active subscribers have the freedom to invest in any of the four investment options available in the proportion they want, albeit subject to overall caps. The investment options available are equity investments, debt instruments, government securities, and money markets and infrastructure investment trusts. 

3) In essence, as explained to the financial daily by an unnamed government official, the draft policy on investment pattern of EPFO would allow a subscriber to choose to park his or her savings "fully in equity, partly invested in equity, or the entire fund kitty could be put in government securities or debt instruments". 

4) Where and how much he or she would like to park his or her money would depend on the risk the subscriber is willing to take and the expected return on investments, the official added.

How is that different from what you have now?

Under the existing investment pattern notified by the finance ministry, up to 50 per cent of your PF savings can be invested in government securities, up to 45 per cent in debt instruments, up to 15 per cent in equity, and 5 per cent each in money market and infrastructure trusts. 

Your PF savings, as is the case with those of all subscribers, are invested in this pattern, at present, ensuring that you cannot choose the investment.  

Withdraw 75% EPFO funds after 1 month of unemployment

This isn't the only good news for EPFO subscribers. In June, it was decided that members will get an option to withdraw 75 per cent of their funds after one month of unemployment and keep their PF account with the body. 

The members would also have an option to withdraw the remaining 25 per cent of their funds and go for final settlement of account after completion of two months of unemployment under the new provision in the Employee Provident Fund Scheme, 1952.  

This new rule replaces the provision that a subscriber can withdraw his or her funds only after two months of unemployment and settle the account in one go. 

The EPFO's apex decision-making body, the Central Board of Trustees (CBT), at its meeting held on March 31, 2015, decided to invest only in exchange-traded funds (ETFs) in the category of equity and related investments.

EPFO had invested Rs 489.46 billion in ETFs till June 30, 2018. The retirement fund body invests in ETFs based on Nifty 50, Sensex, Central Public Sector Enterprises (CPSEs), and Bharat 22 indices. EPFO does not invest in shares and equities of individual companies.