Equity, debt, PMS or AIFs: How does EPFO invest your money and pay guaranteed interest every year? Experts explain — SkimNews
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- EPFO invests fresh inflows under the Finance Ministry’s prescribed pattern: 45–50% in government securities, 35–45% in PSU and corporate bonds, up to 5% in money-market instruments, 5–15% in equity and up to 5% in REITs, InvITs and similar instruments.
- EPFO declared an 8.25% interest rate for FY 2025-26; its Central Board reviews investment income, accumulated surplus and liabilities each year, then recommends a rate subject to government approval.
- Vedant Gupte said EPFO maintained its declared rate during FY20’s March market crash by choosing not to sell ETFs, so subscribers did not directly bear the equity decline in their accounts.
- Rashid Ali said EPFO primarily invests in ETFs linked to the Nifty 50, Sensex, CPSE and Bharat 22.
- Piyush Jhunjhunwala said EPFO has appointed professional portfolio managers to operate within prescribed guidelines and investment limits, but stressed that this is distinct from investing through Portfolio Management Services in equities.
- DPIIT wrote to EPFO in September seeking participation in the newly launched Startup India Fund of Funds 2.0; Jhunjhunwala said the proposal would give EPFO indirect exposure to professionally managed, new-age businesses beyond listed equities and traditional debt.
- Manish P. Hingar described a proposed allocation of up to 3% of fresh inflows to Category I and II AIFs, with a ₹100 crore minimum fund size and exposure limits; he said these relatively illiquid, higher-risk funds should have limited impact on subscriber interest rates because the allocation is small.
Why it matters: For EPF subscribers, the declared 8.25% rate is insulated from volatility in EPFO’s underlying ETFs and bonds, with accumulated surpluses supporting weaker years. Experts say the proposed 3% AIF sleeve is relatively illiquid and higher-risk, but its small allocation and safeguards—including a ₹100 crore minimum fund size—should limit the effect on subscribers’ interest rates.
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