Finance Ministry To Study EPFO, Global Models For Managing UPS Corpus: Report
Global best practices, along with the EPFO's investment strategy, is being reportedly analysed by the finance ministry for managing UPS corpus, a report said.
The Ministry of Finance will study the global best practices and review the Employees' Provident Fund Organisation’s investment experience to formulate a mechanism for managing Unified Pension Scheme, or UPS corpus, according to a report.
“We are still deciding how the government will invest its contribution. We will have some mechanism for it. There will be an investment committee. We will take three to four months to finalise it. We are trying to understand how other countries do it,” an official told Business Standard.
The UPS, which came into effect on April 1, is a retirement benefit scheme for government employees. This is being offered as an alternative to the National Pension System.
About UPS
The scheme was rolled out as a response to repeated demands for reforms in the NPS, which was launched as a contributory retirement benefit plan for central government employees. The market-linked retirement savings scheme came into effect from January 2024.
The UPS for government employees was approved by the Union Cabinet in August 2024. It has been rolled out as an option under the NPS for central government employees, and offers a guaranteed minimum monthly pension of Rs 10,000.
This post-retirement assured payout scheme works through contributions made by the employees and the employer. Under the scheme, employees need to contribute 10% of their basic salary and dearness allowance.
Meanwhile, the government will contribute 18.5% to build a corpus that will be paid out monthly to the retirees. Under the scheme, the employees are assured of a payout at 50% of the 12-month average basic pay immediately before superannuation. In case the qualifying period is less than 25 years of service, a proportionate payout will be offered.
Government To Examine EPFO Investments
The EPFO, which manages the Provident Fund, also relies on diversified investments to grow its portfolio for better returns. It invests the money held in various schemes in debt securities and Exchange-Traded Funds. As of March 31, 2024, EPFO’s total corpus stood at Rs 24.75 lakh crore, according to government data. While the retirement fund body has exposure to equity markets, it does not invest in any individual stocks.
A similar diversified investment strategy could be adopted by the UPS committee for investment of the funds, as per the report.
