The government will decide the interest rate on the country's largest pension fund scheme based on the rate of return on investments in the next financial year, Labour Minister Sahib Singh Verma said on Tuesday.

"The rate of interest of our fund is 9.5 per cent. In the next year, it will be based on the rate of return on our investment. We cannot stick (to a 9.5 per cent interest rate). We will make it totally, purely based on the rate of return on investment," Sahib Singh said.

The Employees Provident Fund is governed by a board of trustees headed by the labour minister which decides on the interest rate at the beginning of each financial year.

The board of trustees had last year rejected a finance ministry proposal to cut the interest rate to bring it into line with overall rates.