See your EPF balance online in a year

With the fear of private pension funds very real, the Employees Provident Fund Organisation (EPFO) is once again picking up the threads of its abandoned “Reinventing EPF India” programme. Central Provident Fund Commissioner A Vishwanathan shares the details with Business Standard. Excerpts:

There’s been talk that the board will increase the age of vesting (popularly called the retirement age), or the age till which you have to contribute to the Employees Pension Scheme (EPS) from 58 to 60. Has a decision been taken to reduce the benefits offered (such as on early withdrawal) in EPS? Both will substantially fix the Rs 20,000-crore gap in the EPS.

Every member of the board is aware of the seriousness of the need to balance assets and liabilities, but the debate on the matter has not yet been conclusive. We want a consensus in the board. Once the board gives its recommendation, the government will decide.

Is it true that though a consensus is not required by law, the EPFO board has voted only once on any matter? What was this for?

It was for whether consulting firm Mercer should be given a contract to do a report on an investment strategy for the EPFO.

Is the report out yet?
No.

Is the EPFO ready to take on private competitors once the PFRDA Bill gets passed finally, on service, on returns?

We’ve done a long business process reengineering exercise and will soon be very customer focused. Around 10,000 of our 19,000 staff have been trained in computers already and all new employees have to be computer literate — around 1,600 people have been hired. There’s a pilot project planned by June in Mangalore, Patna, Karnal, Hyderabad, Indore and Kota, which will allow members to log into the EPFO website (or use interactive voice systems) and check their balances, and by April next year this will be available in 100 of our 110 offices that contain about 90 per cent of our member’s accounts — today, you get a statement once a year. There will be a single Unique Identity Number (UIN) for each member, so you can change as many jobs as you want, your/employer PF contributions will get deposited in this UIN. We will be able to settle member withdrawals within three days once this happens.

But if you don’t do Delhi, for instance, and I move from Chennai with my UIN, how will my Delhi-based employer be able to deposit my PF in this UIN?

There will be this problem for a while and we’ll probably have to run some systems in parallel — in this case, we’ll have to ensure that the non-UIN offices use the same UINs for existing UIN-holders when they switch to UINs.

Your accounts are perhaps the only ones in the world using Foxbase, you can’t even buy an updated version of this since it isn’t available. Isn’t it true that the current system is very prone to misuse since there cannot be any audit trail in the kind of single-entry accounts you maintain?

An audit trail does exist even today, but this is all paper-based, and is, therefore, not as robust, or indestructible. When we move to the double-entry, as we are, the audit trail is better, and issues like the size of funds in the Interest Suspense account that are available for disbursal will be resolved immediately since, at any point in time, we will know the exact status.

Once the new system is in place, it will generate email alerts on its own to companies who have defaulted on payments and put out notices for a statutory audit if the defaults continue — our cumulative arrears are around 1.3 per cent today.

Why is there a confusion over the Interest Suspense Account today?

The Interest Suspense Account has the money that we earn from our investments as well as the money that we have to credit to the accounts of members. So, with a single entry system, there is an overlap between the money that is earned and the one that has to be credited if the accounts have not been updated — there has been a two-year delay in crediting interest to accounts, for instance, since the government did not announce the final interest rate. If there are such delays in future, the three-day settlement will also not be possible.

Every time there’s a shortfall and the government wants to declare a higher return, you hear of funds in the Interest Suspense Account, the Unclaimed Depoit (UCD) Account, the Special Reserve Fund (SRF) … What are these funds and how much reserve do you still have to declare higher than market returns?

The amount in the UCD is Rs 877 crore, but this can’t be used to bridge anything since we are liable to pay up whenever any member or heir claims this. The SRF was built up by forfeiting part of the employers’ contribution when employees leave prematurely — this is now down to around Rs 57 crore since we transferred Rs 700 crore or so last year to make a higher payout.

How serious is the issue of frauds today?

We’ve detected frauds in several centres.

So, you’re saying you’ll now be able to match private pension fund players, when they’re allowed, in terms of service. But what about returns? Won’t existing EPFO members migrate?

Under the proposed PFRDA, once you’re a member of the EPFO, you cannot move to anyone else. Only new employees have that choice. As for returns, I will always be superior since I am taking the risks and assuring benefits.

That’s assuming a certain investment pattern. Since private funds will invest in the market which, over the long run has demonstrably higher returns, won’t people opt for higher returns instead of your fixed 8-9 per cent on EPF? Have you taken a decision on appointing professional fund managers instead of just SBI? On hold-to-maturity for bonds?

The debate is not over, but we’ve had presentations from UTI AMC, HDFC Bank, Mercer, the Actuaries Society and even the RBI recently on investment options and plans. We can trade 10 per cent of securities as per the government but the board has not adopted this.

Are you running out of areas you can invest in?

We can put as much as we want in government paper. But yes, there is a strain. ICICI and IDBI, for instance, are no longer public sector financial institutions. The board is not in favour of investing in corporate bonds. We can deposit in private banks, though, if they’re AAA-rated by two agencies.

Will you invest more in equity?

The board has not yet decided.