EPF Rate of 8.1% for FY 2021-22 Approved by Government

The labour ministry has notified the 8.1% interest rate on provident fund deposits of the Employees’ Provident Fund Organisation following a go ahead from the finance ministry. This will pave the way for crediting the interest into the accounts of over sixty million EPFO subscribers in 2021-22 earlier than usual.
 
In the previous years, interest rate had been generally credited into the subscribers’ account around Diwali or later due to delay in approval from the finance ministry.
 
The interest rate of 8.1% for 2021-22 is the lowest in more than four decades and is a significant cut from 8.5% credited in 2020-21 and 2019-20. EPFO had credited 8.0% as interest rate in 1977-78. Since then, it has been either 8.25% or more.
 
The interest rate of 8.1% has been declared based on EPFO’s estimated income for the year at Rs 76,768 crore and this will leave the retirement fund body with a surplus of Rs 450 crore.
 
The retirement fund body had credited 8.5% in 2019-20 and 2020-21 while it was 8.65% in 2018-19, 8.55% in 2017-18, 8.65% in 2016-17 and 8.8% in 2015-16.
 
The decision to slash interest rate from 8.5% to 8.1% was taken at the EPFO’s board meeting in Guwahati in March this year. The central board of trustees of EPFO or CBT is a tripartite body involving government, workers and employers’ representatives and the decision of CBT is binding on EPFO. It is headed by the labour minister.
 
Though EPFO’s corpus has shot up from Rs 8.29 lakh crore in 2020-21 to Rs 9.4 lakh crore in 2021-22, maintaining an interest rate of 8.5% would have left EPFO with a deficit of Rs 3,500 crore.
 

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Changes in Our Business Model
 
 
25th Sept 2020
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
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  • We will have to suspend the restructuring tool.
 
What changes:
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Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder