Over five crore subscribers of retirement fund body EPFO may soon have an option to increase or decrease investments out of their provident fund into stocks through exchange trade funds (ETF).
In a meeting of Employees’ Provident Fund Organisation’s apex decision making body Central Board of Trustees (CBT) today, it was decided to explore the possibility of giving an option of enhancing equity allocation beyond mandated equity investment limit (presently 15%) and also the option of reducing equity allocation below the limit to the subscribers.
At present, the EPFO subscribers have no such option and the body investment 15 percent of its investible deposits into the ETFs. Earlier last year, the CBT had approved an accounting policy to credit ETFs into the members account apart from cash component.
The CBT has approved the recommendation of the EPFO’s advisory body Finance Investment and Audit Committee recommendation that subscribers are allocated equity units only for 15 percent of their contributions and all units over and above this allocation to all the subscribers would be held by the EPFO, a statement issued by the body said.
The trustee also approved the FAIC recommendation of formulating a separate policy for periodic disposal of these equity units and a separate reserve fund for smoothening out volatility of equity returns and to provide equitable returns to all the subscribers.
According to FAIC recommendation approved by the CBT, after operation of this new accounting methodology (crediting ETFs into EFF accounts) for a certain period, the possibility of giving an option to subscribers to increase or decrease investments in stock should be explored.
The EPFO has planned to credit ETFs into the EPF accounts from April this year after implementation of this new accounting methodology.
The EPFO had started investing in August 2015. In 2015-16 it invested 5 percent of its investible deposits which was subsequently increased to 10 percent 2016-17 and 15 percent in 2017-18.
The EPFO has invested Rs 41,967.51 crore in ETFs with return of 17.23 percent as on February 28, 2018. The body had sold ETFs worth Rs 2,500 crore in March this year.