Well, this is a reaction to one of those unconfirmed press reports. It seems that Employees' Provident Fund Organisation (EPFO) is mulling investments in private sector bonds. On the face of it, this sounds like a trivial detail. Actually, it isn't. This is one more effort to boost returns that is declared every year. Thanks to terrible control structure of the EPFO, the trustees nominated by the Labour Ministry propose a high rate every year and Finance Ministry, the other controlling Ministry, which finally has to endorse the rate, drags its feet or the final returns, either, or, and most of the times, both. It is a dreadful annual ritual. Given the state of the bond markets, believe it or not, but the large provident fund (PF) monies don't have adequate quality bonds in which they can be invested in. Of course, there are investment norms for PF monies. The sad part about EPF is that despite being a long term savings option, it has never given more than 2.0-2.5 per cent annual returns adjusted for inflation in best of times. And in these times of high inflation, you can banish the thought of a positive real rate of return. Imagine all this happening to funds where 12 per cent of one's basic heads before even one says boo. Unless I am wrong, this 12 per cent is one of the highest in the world.
And then there are a whole list of other problems from transferring and withdrawing, with the latter still requiring speed money in many cases.The whole system is yet to have the transparency which the subscriber deserves and is unlikely to get since EPFO, by law, regulates itself. Try finding some other examples.Since people keep withdrawing money from PF on some pretext or the other and take little interest in what is happening to their hard earned money in the long-term, this mess keeps perpetuating itself. In one pension seminar, many years back, I almost fell off the chair when one presentation showed 4 per cent fund management cost. I hope the expert was wrong. Any private asset manager would be crucified for something like that. What could make things change? One, try to popularise NPS. Once people get used to its transparency, they will demand more accountability. Second, have one regulator for all retirement funds. If you can't do that just get it to some other regulator. What the current dispensation has produced is there for all to see.
And then there are a whole list of other problems from transferring and withdrawing, with the latter still requiring speed money in many cases.The whole system is yet to have the transparency which the subscriber deserves and is unlikely to get since EPFO, by law, regulates itself. Try finding some other examples.Since people keep withdrawing money from PF on some pretext or the other and take little interest in what is happening to their hard earned money in the long-term, this mess keeps perpetuating itself. In one pension seminar, many years back, I almost fell off the chair when one presentation showed 4 per cent fund management cost. I hope the expert was wrong. Any private asset manager would be crucified for something like that. What could make things change? One, try to popularise NPS. Once people get used to its transparency, they will demand more accountability. Second, have one regulator for all retirement funds. If you can't do that just get it to some other regulator. What the current dispensation has produced is there for all to see.
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