EPFO rate reduced to 8.5% to 8.1% for 2021-22

The Employees Provident Fund Organization (EPFO) has lowered the return on workers retirement savings to 8.1 percent from the 8.5 percent rate given to EPF members accounts in the last two years.

The previous time yearly returns on EPF savings were this low were in 1977-78, when the rate was 8%, although that was the highest rate on EPF savings at the time since the EPFO's founding in 1952. Since then, the EPF rate has been less than 8.5 percent just three times – in 1979-80, 1980-81, and 2011-12 — when balances earned an 8.25 percent return.

At meeting in Guwahati on Saturday, the EPFO's Central Board of Trustees (CBT), led by Labour and Employment Minister Bhupender Yadav, proposed 8.1 percent. The Finance Ministry must approve the rate before it is informed and credited to members' accounts.

The reduction in the EPF rate, at a time when inflation is resurgent, attracted condemnation from the board's primary trade union representatives, who argued for the retention of the 8.5 percent return. Employee representatives also criticised the most recent rate drop on EPF savings from 8.65 percent to 8.5 percent in 2018-19 to 2019-20.

Mr. Yadav attempted to ease fears, stating that he is pleased to announce 8.1 percent at a time when a 10-year fixed deposit with the State Bank of India earns little over 5.4 percent and savings products such as the Public Provident Fund yield between 6.8 and 7.1 percent.

The EPFO's investment revenue increased to Rs. 76,768 crore this year, up from around Rs. 70,000 crore in 2020-21, when it had paid out 8.5 percent to EPF accounts. The EPF corpus increased from 8.29 lakh crore to 9.42 lakh crore over the year.

Since 2015-16, the EPFO has invested at least 5% of additional EPF inflows into members' accounts in the equities markets. A minimum of 45% of fresh accounting is invested in government securities, with a maximum of 65%.