Provident Funds, pension funds can soon invest in corporate bonds

Provident Funds, pension funds can soon invest in corporate bonds

The Finance Ministry said it will soon relax norms to enable pension and provident funds to invest in the corporate bond market, with a view to provide an additional funding source for infrastructure projects.

Addressing leaders from the infrastructure sector, Department of Economic Affairs Secretary Arvind Mayaram said the government is keen to develop the corporate bond market.

Among other things, he said relaxation of investment guidelines of pension and provident funds is required to enable the participation of a long term and stable class of investors in corporate bond market.

"This is one area (relaxation in investment norms) we are very actively looking at and we would be coming out with some new guidelines in the near future," Mayaram said.

While India has a very advanced G-sec ( government securities) market, the corporate bond market is relatively under-developed.

EPFO improving services eyeing ISO 9001 certification

Swankier offices of the half a century old Employees’ Provident Fund Organisation (EPFO) along with a sharp improvement in its services may be a reality. The country’s largest retirement fund manager is on a drive to implement ISO 9001 standards at all its branches.

Field offices have been asked to settle all claims within 10 days and claims arising out of death of members within three days. Further, pensions given under the related Employees’ Pension Scheme (EPS) must be disbursed by the last working day of a month and credited into the member’s account by 3rd of every month.

These are a part of the performance parameters that the EPFO has outlined for all field offices to implement by end of the fiscal.

EPFO considering minimum pension of Rs 1,000

Subscribers of the retirement fund body EPFO may soon get a minimum monthly pension of Rs 1,000 after superannuation, if a proposal in this regard is cleared by the Finance Ministry.

"Labour Ministry has recently sent a proposal to the Finance Ministry to fix minimum pension to the EPFO subscribers at Rs 1000, no matter what their contribution is towards the scheme," a source privy to the development said.

 On the recommendations of the Employees Provident Fund Organisation (EPFO), the Labour Ministry has proposed to the Finance Ministry to either withdraw the two year bonus given to subscribers on completion of 20 years of service or bear additional burden of Rs 539 crore every year for fixing minimum pension of Rs 1,000.

At present every subscribers who completes 20 years of service is given benefit of additional two year bonus while tabulating his or her pension.

According the the EPFO, if this two year bonus is withdrawn, the exercise of fixing minimum pension at Rs 1,000 would be a revenue neutral exercise besides pensioners getting about 5 per cent relief.

However, if the Finance Ministry does not go for this alternative, the government would have to shell out Rs 539 crore every year in addition to its existing payout of Rs 994 crore annually for contributing 1.16 per cent of basic pay and DA to the pension fund.

According to data, as on March 31, 2010, there were 35 lakh EPFO pensioners of which 14 lakh get a monthly pension of less than Rs 500.

The number of EPFO pensioners getting a monthly pension of Rs 1,000 is 7 lakh. The data reveals there are cases where pensioners are getting a monthly pension as low as Rs 12 and Rs 38. 

Link to article - http://articles.economictimes.indiatimes.com/2012-08-20/news/33288005_1_minimum-pension-epfo-pensioners-retirement-fund-body