The 70-year old Employees’ Provident Fund Organisation has a generosity problem. One of ruinous generosity. The EPFO has a corpus of $211 billion in retirement funds thanks to 60 million employees squirrelling away 12% of their salary every month, along with their employers. So EPFO's bank-beating interest rates should provide great comfort to its members at a time of diminishing interest rates, right? Right? Not really. Not when it gives out a higher interest rate to its members when it makes low returns from its debt investments. Some 90% of its investments are tied up in government instruments, throwing off the return on investment balance. If it continues down this path, the EPFO risks becoming underfunded, which could force it to resort to Ponzi scheme-like mechanisms. And if that's not worrisome enough, EPFO's disclosures, investment patterns, accounting practices also do not inspire confidence, making it a giant black box. It's not just the financial and policy experts who are concerned—even the Ministry of Finance has its doubts about EPFO. Anand's story today is an important one that tells us the status of EPFO like it is and lays out the reforms it needs. If you care about your nest egg, you’ll want to read this. It’s also free, so you can share it widely..
