EPFO equity debate: Should subscribers get more investment choice?

The Employees' Provident Fund Organisation (EPFO) currently offers a uniform 8.25% return on retirement savings, investing 85% in fixed-return debt and capping equity exposure at 15%. This one-size-fits-all approach applies to all subscribers, regardless of age or risk appetite, sparking a debate over whether younger workers should be allowed higher equity allocation.

Younger employees argue for more equity exposure, pointing to historical stock market returns of 15% to 50% annually, while risk-averse members stress the need for capital protection. EPFO's mandate prioritises safety over maximising returns, and unlike individual investors, it must sell equity annually to meet fixed payout obligations, making it vulnerable to market shocks.

The National Pension System (NPS) allows up to 100% equity allocation, but EPFO's larger scale, processing over 60 million claims yearly, poses administrative challenges to introducing individual choice. Experts suggest gradually raising the equity cap in 5% increments while improving subscriber financial education.