Employee Provident Fund Organization (EPFO) invests the contributions of employees and employers in Exchange Traded Funds like Nifty 50, Sensex, Central Public Sector Enterprises (companies in which the direct holdings of central govt are 51% or above), and Bharat 22 indices. In order to avoid the risk of investment, EPFO doesn’t invest in equities of individual companies.
EPFO pays interest to the provident fund accumulations of the employees from the interests earned from these ETF investments. The present EPF interest rate for the financial year 2019-20 is 8.65%.
By September 2019, EPFO invested 86,966 Crores of rupees in the above mentioned ETFs. Hence the total amount of EPF is investing in ETFs the risk of losing money is very low and the returns will be steady.
EPF is the best social security scheme for the employees, because here along with the 12% contribution of employees on their basic wage they will also get another 12% contribution of the employer (3.67% in PF and 8.33% in pension).
I would like to give one suggestion here, if you are contributing to EPF then don’t withdraw your EPF amount unnecessarily when you shift jobs. Because when you withdraw it then you will miss the compounding benefit of your EPF investments. So it is better to keep your money in EPF account until you retire.