EPFO aims to invest more in equity for younger members, expand horizon

At present, EPFO is allowed to invest between 5-15 per cent of its investible deposits in equity instruments irrespective of the age or risk profile of its members

The Employees’ Provident Fund Organisation (EPFO) is looking to differentiate its investments based on age and risk profile of its members, as it aims to invest more in equity for younger members and expand its investment horizon both in terms of asset class and geographies.

At present, EPFO is allowed to invest between 5 and 15 per cent of its investible deposits in equity instruments, irrespective of the age or risk profile of its members.

A vision document for EPFO released by the Union Labour Minister Bhupender Yadav on its 70th foundation day on Tuesday laid out a phase-wise road map for one of the world’s largest social security organisations to ensure social security to all workers in the next 25 years till 2047. 

“EPFO envisages to have world-class investment management infrastructure and the team managing the assets,” the document says.

In the first phase covering the period up to 2027, EPFO aims to have separate modes of investments for provident fund and pensions. In the second phase up to 2032, the social security organisation looks to differentiate investments by age and risk-profile. Investing pension funds in longer-term infrastructure and real estate for sustained returns constitute the third phase up to 2037 while at the same time building specialised investment capacity with multiple global experts for different asset classes.

The fourth phase up to 2042 and the last phase up to 2047 will see the EPFO having exposure to the global funds and projects for higher returns, while also augmenting its capacity to provide investment consultancy to global funds. 

“(By 2047) Expand investments into global infrastructure and equity for leveraging returns (while) developing capacity for managing global funds,” the vision document states. 

Besides, the organisation is looking to universalise its coverage of the formal sector by the next decade and include all the nine benefits like medical care, maternity, and disability benefits, among other things, as envisaged under the International Labour Organisation’s Social Security (Minimum Standards) Convention, 1952, which may entail some changes in the current policy architecture.

“Within the next decade (by 2032), EPFO needs to extend coverage to 100 per cent of formal workers as per its mandate. This will necessitate removal of headcount and wage thresholds of coverage, enabling coverage of all workers irrespective of income or size of enterprise,” the document states. 

The document lays down the vision for covering 100 per cent of informal workers by 2037 and benchmarking benefits to international standards for both the formal and informal workers. 

New-age technologies like Artificial Intelligence, machine learning, blockchain form the backbone for facilitating these objectives and deliver its services in an enhanced user friendly way.  

Aside from investments and extending coverage, the document also lays emphasis on leveraging alternate work environments like flexible workplaces, assigning value to unpaid care work and improving workplace safety and gender-specific facilitation at work, in a bid to exceed the global average Labour Force Participation Rate by 2047 for both males and females.