What is EPFO’s ‘Single Pool’ Scheme? Big impact on PF members 

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EPFO: The Employees’ Provident Fund Organization (EPFO) is set to revise its investment strategy soon. As is widely known, the EPFO invests a portion of its surplus earnings in ETFs on a monthly basis. These investments are drawn from distinct accounts associated with the EPFO’s five schemes. However, this practice is about to change in the near future. The EPFO will now consolidate funds from all five schemes into a single account and will make investments collectively once a year. In addition, the EPFO is preparing to take part in the buyback offer for non-convertible debentures related to the Delhi-Meerut Expressway Development. Let’s delve into the planning that the EPFO is undertaking.

What is EPFO planning?

The Employees’ Provident Fund Organization (EPFO) is gearing up to merge funds from all five of its schemes into one account for ETF investments. It also intends to transition from the current monthly investment schedule to an annual one. This change will greatly streamline the regulatory and operational processes linked to ETF investments by the EPFO. At the same time, the retirement fund organization will engage in the fourth buyback round offered by the Delhi-Meerut Expressway Development (DMEDL) to offload its non-convertible debentures (NCDs) at an offer price of Rs 103,468 for each bond, which has a face value of Rs 100,000.

These proposals, which have been approved by the Investment Committee, will be presented to the EPFO’s Central Board of Trustees for review and approval during their meeting on March 2. However, the announcement regarding the anticipated interest rate that the EPFO will offer for 2025-26 has not been included in the agenda shared by the retirement fund organization. According to a report from ET, the agenda for the Central Board of Trustees indicates that the EPFO will develop a new Standard Operating Procedure (SOP) for ETF investments to tackle existing challenges.

Since 2015, the EPFO has been allocating 5-15 percent of its increased income into ETFs. The agenda indicates that the EPFO will establish a standardized, consolidated system for ETF investments across all its schemes. An ET report mentions that this initiative will assist the EPFO in adhering to the stock market regulator’s requirement that direct transactions with providers exceeding Rs 25 crore are only allowed.

Currently, under the SOP that has been in place since 2016, the EPFO employs a scheme-wise investment strategy without any consolidation. Looking ahead, it intends to transition to annual investments, which is anticipated to mitigate market timing risks. Additionally, the agenda highlights that annual SIP (Systematic Investment Plan) calculations for ETF investments will render the existing monthly cycle from the 20th to the 19th unnecessary. The EPFO also aims to introduce clearly defined timelines to guarantee consistent market participation, including the prompt issuance of deal slips and ETF redemptions, moving away from the current practice of lacking fixed timelines.

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