Former workers to get PF at 8.5%

The labour ministry has issued a notification asking the Employees Provident Fund Organisation to pay 8.5 per cent interest to employees who have quit or lost their jobs in the current financial year.

This comes as a major relief for about 10 lakh beneficiaries of the EPFO who exited the scheme this year. A notification in this regard has been sent by the labour ministry to the EPFO.

Centre for Indian Trade Union representative in the central board of trustees WR Vardharajan said the EPFO had not credited accruals to the EPF since March 31, 2003, as they had not been ratified by the government.

The EPFO had decided that those who had quit or lost their jobs could collect the interest later since the rate had not been ratified.

"We took the position that such exit cases never come back to collect the interest. It, then, becomes an eternal loss. We asked the government to pay at least 8.5 per cent to them," Vardharajan said.

The central board of trustees had proposed an "interim" interest rate since the finance ministry had not ratified the rate for this year. This was because there was a gap of over Rs 200 crore (Rs 2 billion) between the interest earned by the EPFO and that offered to the beneficiaries.

Anticipating a mismatch between its interest earnings and outgo, the CBT's investment and finance sub-committee had earlier said that the EPFO would not be able to offer more than 8 per cent interest for this year.

The CBT had decided on a 9.5 per cent interest rate for 2002-03 and 2003-04, which had not been ratified by the government.

The finance ministry has been insisting that the interest for 2003-04 and 2004-05 should be fixed at 8 per cent. It also wants that the 8.5 per cent rate decided for the current year be brought down to 8.25 per cent.

The finance ministry has said a high interest rate for EPF was not sustainable.

Moreover, higher returns would only help those having large balances, who invariably belonged to the high-income group. As much as 70 per cent of the EPFO accounts had only Rs 4,000 or less.