The Employees’ Provident Fund Organisation (EPFO), the institution invested with safeguarding and growing your retirement savings, usually does a poor job of its mandate.
Apart from shoddy accounting, which saw the organisation claim a surplus in 2010-11 when it was actually in deficit, it also provides poor service to the millions of workers who are forced to rely on it to safeguard their lifetime's savings. The organisation is now managing a corpus in excess of Rs 7,00,000 crore – and rather poorly. Between 2005 and now, it earned its subscribers a negative real rate of return – Rs 100 invested in 2005 became Rs 193, but after adjusting for inflation, the Rs 100 became Rs 97, according to this Mint story.
And now, with interest rates set to fall in the coming years, the EPFO will have trouble trying to generate even the 8.5-9.5 percent average returns that it has been managing so far. Yields on the safest of safe securities (the 10-year government bond) are down to 8 percent or less after the RBI’s recent monetary policy guidance, which talked of rate cuts “early next year.”
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