Is EPFO ​​a safe bet for retirement fund? EPF investment strategy explained

For many Indian investors, this is the primary savings for retirement purposes, but still, they do not fully understand how the money is invested.

How EPFO ​​invests its money?

EPFO follows a very simple and bookish strategy when it comes to investments. As per norms, 85 per cent of the annual earnings are invested in debt and 15 per cent in equities.

• Debt Investment: While selecting debt instruments, the organization has to ensure to invest in Government securities with a minimum of 45% and a maximum limit of 65%. Again, another 20% to 50% need to be invested in listed debt securities issued by corporate entities including banks and public financial institutions. Further, it is allowed to invest up to 5% in short-term debt or related investments, given that the underlying papers have a minimum rating of A1+ by the 2 rating agencies registered by SEBI.
• Equity Investment: For equities, it can invest in MFs and ETFs that mimic the Sensex and Nifty indices and are SEBI registered. Also, they can invest directly in listed shares of companies with market capitalization of at least 5,000 crore as on date of SEBI regulated investments and REITS.

Provident fund savings is mandatory and as per EPFO ​​rules, at least 12% of the basic salary of the employee is mandatorily deducted for saving and another 12% is deposited by the employer.

EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55% in 2017-18. The interest rate was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent interest in 2013-14 as well as 2014-15, which is higher than 8.5 per cent in 2012-13. The interest rate in 2011-12 was 8.25%.