Retirement plans affected with interest rate on Employee Provident Fund falling

The Employees’ Provident Fund Organisation has announced that the interest rate for 2017-18 is 8.55%. This is lower than 8.65% for 2016-17.

This is the second time in a row that the retirement fund body has decreased the interest rates for its subscribers. The EPFO had announced 8.65% rate of interest on deposits for 2016-17 and in 2015-16 it was fixed at 8.8%.

The EPFO decided to lower the rate even after there were reports that the retirement body had sold a portion of its investments in exchange-traded funds (ETF) worth Rs 2,886 crore earlier as it wanted to retain the rate at 8.65%.

There are reports that the EPFO had earned a return of Rs 1,054 crore on sale of ETFs in February, which would be enough to stay with a 8.65% rate of interest in the current financial year.

The returns from PF deposits are still attractive compared to other investment schemes like PPF and bank deposits, which draw lower interest rates. Last year, the government had trimmed the rates on small savings schemes such as National Savings Certificate and PPF by 20 basis points, but left out senior citizens.

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