Funding retirement

EPFO should adopt modern fund management principles

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All fund managers aim to deliver superior returns to investors, but few consistently achieve this over time. Several factors, including the fund manager's skills, affect returns generated on the invested corpus. However, the Employees' Provident Fund Organisation (EPFO), the country's largest retirement fund, to which organised-sector employees contribute a part of their monthly salary, has been consistently giving superior returns to its contributors. For 2024-25, for example, it declared a return of 8.25 per cent while the average yield on 10-year government bonds was 6.86 per cent during the year. Given that the EPFO invests largely in government bonds, its returns on investment are unlikely to be vastly different from the interest offered on such bonds. The gap is reportedly being met with the realisation of gains on equity investment. This is clearly not a sustainable model. Returns in equity markets are significantly more volatile than those in debt markets.