EPFO to pay 9.5% on claims till new rate is decided

Subscribers of retirement fund manager EPFO, settling their final claims before the new rate is announced for the current fiscal, will get the existing 9.5% interest on their deposits.

"Since the rate of interest (on deposits) for FY11 has been declared as 9.5% per annum, settlement of claims of the EPF subscribers during FY12 shall be made at 9.5% per annum till rate of interest is declared for FY12," said an order issued by the Employees' Provident Fund Organisation (EPFO).

The decision will benefit those subscribers who are either retiring or going in for full and final settlement of their accounts before the new rate is announced for FY12.

In September, EPFO had announced 9.5% rate of return on deposits for over 4.71 crore subscribers for FY11, which has been ratified by the Finance Ministry.

The order is contrary to the view of the Chairman of EPFO's apex decision making body, Central Board of Trustees (CBT), who wanted to give 8.5% rate for FY12 to all outgoing subscribers settling claims this fiscal.

CBT, which is headed by the Labour Minister, had expressed the view of providing 8.5%.

EPFO had been providing 8.5% rate of return to its subscribers for five years since FY06. It was raised to 9.5% for FY11 after EPFO discovered a surplus of over Rs 1,700 crore.

According to the Employees' Provident Fund Scheme, EPFO has to settle claims at the rate provided for the previous fiscal, in case the rate for the subsequent financial year has not been declared.

This rule will benefit all those subscribers who would settle their claims before the announcement of the rate of return for FY12.

They will retain the gains even if EPFO announces interest rate lower than 9.5% for this fiscal, but will be able to claim the difference if the rate happens to be higher.