Pension fund interest rate for 06-07 likely to remain at 8.5 percent

Panel on pension fund on Monday recommended an 8.5 percent interest rate for its flagship scheme, for the year 2006-07, same as what was paid last year.

New Delhi, July 23:Panel on pension fund on Monday recommended an 8.5 percent interest rate for its flagship scheme, for the year 2006-07, same as what was paid last year.

Union Labour Minister Oscar Fernandes said that the board of Employeesrovident Fund Corporation has decided to recommend to the government not to change the interest rate for the year 2006-07.

"We have decided that we will recommend to the government an interest rate of 8.5 percent for the year 2006-07," said Fernandes.

However, Fernandes said that the earnings were bound to be different next year as bank rates have also gone upward.

"We are not going back, we are deciding for the period elapsed, i.e. year 2006-07. Now bank rates are going up as of today. So when you come to the next financial year you may see a change in the earnings," said Fernandes.

Fernandes had earlier said that the country's largest pension fund would find it difficult to continue to pay 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 2006-07, same as that paid in the year 2005-06.

Employees Provident Fund Organisation (EPFO) invests 80 percent of its fund in a special Central deposit scheme that offers 8 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