The 233rd meeting of the Central Board of Trustees (CBT) of the retirement fund organization will take place on March 27-28 to discuss various topics such as the interest rate for the financial year 2022-23, a pension option linked to actual salaries that offer higher benefits, and annual financial estimates for the Employees’ Provident Fund Organisation (EPFO).
It is expected that the interest rate for FY23 will remain at or above 8%, as interest rates are increasing. Last year, in March 2022, the Central Board of Trustees (CBT) recommended an interest rate of 8.1%, which was the lowest in four decades, for over 6 crore active subscribers of the Employees’ Provident Fund Organisation (EPFO) for the financial year 2021-22. This decision left the EPFO with an estimated surplus of Rs 450 crore. In June 2022, the finance ministry approved this interest rate. It is worth noting that FY22 will be the first financial year where the government's proposal to tax interest on higher contributions to the EPF will be implemented.
During March 2022, the Central Board of Trustees (CBT) advised an interest rate of 8.1% for over 6 crore active subscribers of the Employees' Provident Fund Organisation (EPFO) for the financial year 2021-22, which was the lowest in four decades. This decision resulted in an estimated surplus of Rs 450 crore for the EPFO. Later in June 2022, the finance ministry gave official approval to this interest rate. Additionally, the current financial year (FY22) is the first year in which the government's plan to tax interest on higher contributions to the EPF will be put into action.
Numerous subscribers reported that the interest rate for FY22 was credited with delays. Moreover, during the upcoming CBT meeting, a comprehensive conversation is anticipated to occur regarding the topic of higher pension, as per the orders of the Supreme Court. This meeting marks the first instance in which a status note on pensions will be discussed since the Employees' Provident Fund Organisation (EPFO) provided a time frame until May 3rd for the subscribers of the Employees' Pension Scheme to select the higher pension option that is linked to their actual salaries.
The EPFO is facing two primary issues as it endeavours to implement the higher pension option for its subscribers. Firstly, there is a substantial actuarial deficit in the Employees' Pension Scheme (EPS), which highlights the disparity between the net present value (NPV) of contributions and benefits. Secondly, there is a gradual increase in the number of pensioners in the future, which is also causing concern for the EPFO.
During the CBT meeting, the conversations on pensions are anticipated to focus on the number of applications received thus far and the predicted actuarial effect on the fund. Last year, during the legal proceedings in the Supreme Court, the EPFO responded by stating that the actuarial deficit of the pension fund would increase to over Rs 15 lakh crore if the higher pension plan were implemented after the Kerala High Court had invalidated the changes to EPS made in 2014.