Where does your provident fund get invested?

The Employee's Provident Fund (EPF), the retirement benifit scheme, is maintained and overseen by the Employee's Provident Fund Organisation (EPFO).

When you start working, you and your employer contribute 12% of your basic salary towards your EPF account. From the employer's share  3.67%  goes to the EPF account while the balance 8.33% is diverted to your Employee's Pension Scheme (EPS).

All these funds together is invested by a trust that generates an interest between 8-12 percent. This rate is decided by the government and central board of trustees. The current interest rate in India is 8.75%

So, the real question is: where all does the EPFO invest ?

1. EPFO's funds are invested in various debt instruments that promise high security and guaranteed returns.

2. Another fraction of 35% needs to be invested in listed debt instruments issued by companies, banks and financial institutions.

3. It is also mandatory for EPFOs to invest 45% of their accumulated funds in government securities.

This year, however,the Opposition has raised a complanit that the investments by EPFO have given lesser returns than what was announced by the government.

Since the EPFO entered the equity market in August 2015 till June 2016, it has invested a sum of Rs 7468 crore in Exchange-Trade Funds (ETFs) with an absoltue return of 7.45%.

This is lesser than the 8.8% interest rate the government announced for 2015-16 on EPF contributions.