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Where Is Your PF Money Invested?


Employees' Provident Fund (EPF), simply known as PF or Provident Fund, is a statutory retirement savings fund that salaried employees in India are required to mandatorily contribute towards every month.

It is a tax-free investment that is aimed at facilitating a substantial retirement corpus for individuals.

However, how the money, contributed by over 6 crore subscribers, is invested is decided by the government and not the subscribers.

Where Is Your PF Money Invested?

Some of the subscribers may not be aware that the EPFO (Employees' Provident Fund Organisation) started investing a part of the EPF contributions in equities a few years ago. As a result, in September, the regulatory body said that it will not be able to pay the previously announced interest rate of 8.5% in one installment (like it usually does) due to the COVID-19 induced decline in the stock market. It will be paid in two installments of 8.15% and 0.35%.

Where is the EPF money invested?

After several years of debate and amid opposition by trade unions, the EPFO had decided to invest in equity and related investments via index ETFs (Exchange Traded Funds) in March 2015. It was agreed upon to not touch the existing corpus and only put fresh contributions into the stock markets. This contribution was limited to 5% and then increased to 10% and eventually raised to 15% in 2017.

Equity related investments include ETFs based on Sensex, Nifty 50, Central Public Sector Enterprises (CPSEs) and Bharat 22 indices.

The remaining is invested in fixed-income assets like government securities, bank fixed deposits and private sector bonds.

Before 2015, EPF contributions were purely invested in fixed income assets.

In 2018, the minimum investment limit in 'Debt Instruments and Related Category' of EPF investments was lowered from 35% to 20%.

As on September 2019, the total amount invested by EPFO in ETFs is Rs 86,966 crore, as per a statement made in the Parliament.


The Finance Ministry is in the favour of allowing EPF investments in debt ETFs, provisions for which were not made earlier when EPFO started investing in the stock markets.

Arguments for and against equity investment by EPFO

Many investors welcomed this decision because historically, equities have proven to hold the greatest potential to deliver the highest returns over the long-term when compared to other asset classes. Since EPF is also a long-term investment, investing only in fixed income assets does not help beat inflation.

However, the one-size-fits-all approach may not be favoured.

Asset allocation is generally treated with an individual-specific point of view as the risk appetite of those closer to retirement will be smaller than the younger salaried individuals.

Younger subscribers have the time to wait for the stock markets to recover from the economic effects of coronavirus pandemic but an older subscriber, closer to retirement cannot risk it.

Some have also suggested opting for an NPS (National Pension System) like approach in EPF which gives investors options to decide their asset mix based on their risk appetite.

NPS offers two types of accounts: NPS Tier I and NPS Tier II. The Tier II account is market-linked and allows investors to decide a suitable asset allocation pattern.

About the author

Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. She was previously employed as an audit associate with a Big Four accounting firm before venturing into journalism. Her interests include tax planning, equities, DIY personal finance management and government schemes.

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