Interest rate may change in pension fund : Oscar Fernandes

Union Labour Minister Oscar Fernandes on Wednesday said the Central Government is considering a proposal to give more than eight percent as interest on employees pension fund.

New Delhi, July 18 : Union Labour Minister Oscar Fernandes on Wednesday said the Central Government is considering a proposal to give more than eight percent as interest on employees' pension fund.

"There is expectation on the part of the labourers to get something higher than eight percent. As we worked it out, it was possible for us to pay interest rate of about eight percent only but now we are deliberating and seeing if we can raise it a little bit," Fernandes said.

The Employees Provident Fund Organisation (EPFO) panel met several times last year, but was unable to decide on the interest rate to be paid for the year 2006-07.

Government nominees in the EPFO trustees' board wanted the rate to be cut by half a percent to eight percent, but trade union members opposed the proposal, citing the hardening of rates on other instruments.

Fernandes had earlier said that the largest pension fund would find it difficult to continue paying 8.5 percent interest rate on its flagship scheme.

He had cited an internal panel's estimate that found the pension fund would run up to a deficit of 4.5 billion rupees if it pays 8.5 percent interest for the year 2006-07, same as that paid in 2005-06.

He had also said that the Central Board of Trustees of the EPFO would take a final decision on the interest rate when it meets.

EPFO invests 80 percent of its fund in a special central deposit scheme that offers eight percent returns, and the rest is invested in bonds.

EPFO manages three schemes -- Employees' Provident Fund, Employees' Pension Fund and Employees' Deposit Linked Insurance Fund -- with more than 2.16 trillion rupees of 43 million subscribers.

ANI