EPFO’s Rate of Interest will be Slashed to 8.1 Percent for 2021-22, Reducing Middle-Class Savings
The Employees’ Provident Fund Organisation (EPFO), a famous savings scheme for lakhs of salaried middle-class Indians, settled on an 8.1 percent interest rate on provident fund deposits for 2021-22 on Saturday, a downward revision.
Rate of interest
The fund management held the savings rate of interest stable at 8.5 percent the previous year (2020-21), although Saturday’s downward revision seems to be the lowest in years.
The decision to cut the rate of interest, a highly followed working-class savings statistic, will not be welcomed by the almost 60 million active EPFO members, for whom the provident fund is frequently the only way to save for retirement.
The Employees Provident Funds and Miscellaneous Provisions Act of 1952 makes provident fund deposits mandatory.
“In today’s meet, EPFO consensus has been that it will pay an 8.1% interest on deposits based on the current position of earnings and deposits of the organization,” Virjesh Upadhyay, a board member of EPFO, told HT.
According to EPFO standards, at least 12% of an employee’s base income must be deducted for provident fund contributions, with the employer contributing another 12%.
EPFO’s earnings were impacted by the Covid epidemic. EPFO has postponed payments for the 2019-20 fiscal year. It was paid in two installments, with 8.15 percent coming from debt investments and 0.35 percent coming from EPFO’s stock holdings.
Due to low earnings, the retirement fund manager had to reduce the interest rates paid to depositors in previous years. For example, in 2017-18, the organization paid a rate of interest of 8.55 percent. The rate of interest was considerably higher in 2016-17, at 8.65%.
EPFO and new subscribers
EPFO gained 13.95 lakh net subscribers for November 2021, as per the labor ministry’s most provisional estimates of employment data released on January 22, 2022, a rise of 2.85 lakh contribution over the earlier month of October 2021, with a rate of growth of 25.65%.
According to the January 2022 update, that provided an age-by-age comparison of payroll data, the age range 22-25 years had the largest number of net enrolments for November 2021, at 3.64 lakh additions.
The 18-21 age bracket also saw an increase of about 2.81 lakh net enrolments. In November 2021, the age bracket of 18-25 years accounted for roughly 46.20 percent of all net subscriber increases.