EPFO plans new benchmarks for EPF, EPS, and EDLI investment returns

The Employees’ Provident Fund Organisation (EPFO), which manages the retirement savings of India’s formal workforce, is working on devising a separate benchmark for the yields on investments under the three social security schemes it operates – the employees’ provident fund (EPF), pension scheme (EPS) and a deposit-linked insurance cover (EDLI), the Business Standard has learnt.

 

The development comes in the wake of a Reserve Bank of India (RBI) suggestion to the Labour and Employment Ministry to review the EPFO’s present approach of investing all three schemes’ corpus as a common ₹25 trillion pool with the same investment pattern, even though their actuarially assessable liabilities differ. The RBI has also mooted a redesign of the benchmarks used to measure investment performance for the schemes.

 

EPFO invests anywhere between 45-65 per cent of all its fresh accretions in government securities, followed by 20-45 per cent in debt instruments, 5-15 per cent in the equity markets through index funds, and zero to five per cent in short term debt instruments. 

 

The EPFO presently assesses the performance of its multiple fund managers on the basis of an evaluation conducted by its consultant Crisil Limited based on portfolio yields and asset quality. Crisil ranks the performance of the debt portfolio of EPFO’s corpus using a benchmark linked to bond yields, while the equity portfolio is benchmarked against the performance of the indices in which EPFO invests – the BSE Sensex and Nifty50.  

 

Now, the retirement fund body is deliberating upon using two separate benchmarks - one for its EPF corpus investments, and another for investments made under the Employees’ Pension Scheme (EPS) and Employees' Deposit Linked Insurance (EDLI). 

 

"A draft benchmark methodology has been prepared by portfolio manager Crisil after deliberations. The same is to be further validated by a committee of external experts. Subsequently, the proposal will be placed before the EPFO board’s Investment Committee for deliberation and recommendation to the government,” a source aware of the development said. 

 

Doorstep delivery of Digital Life Certificate 

 

Meanwhile, the Central Board of Trustees (CBT), the EPFO’s apex decision making body chaired by Union Labour and Employment Minister Mansukh Mandaviya, is expected to clear a new facility to provide doorstep delivery of digital life certificates (DLCs) to nearly 8 million pensioners under the EPS through the India Post Payments Bank (IPPB).

 

Life certificates are vital for ensuring timely pension payments and preventing over-payments after a member’s death. They also enable timely start of pension for family pensions remitted to widows and dependent children.  

 

“It is a challenge for old age pensioners to submit DLC due to digital illiteracy and poor accessibility to technology, leading to delays or stoppage of pensions, causing financial distress. They need a solution to ensure doorstep service keeping in view their very old age. Thus, MoU with the postal department will enable pensioners to visit the nearest post office or call the postman at home instead of having to visit banks/ EPFO offices. This would be particularly helpful to pensioners living in remote and rural areas,” said a source aware of the development.

 

Once the CBT grants its approval, the retirement fund body will ink a memorandum of understanding (MoU) with the IPPB, thus making the facility operational. Currently, the postal department charges ₹70 for delivering DLC to individuals who use its services. These charges will be reduced to ₹50 and reimbursed directly to IPPB by the EPFO through a centralised pension payment and reconciliation centre (CPPRC). 

 

This engagement with IPPB is expected initially for two-three years, during which pensioners will also be educated to eventually submit DLCs independently through face authentication technology (FAT).