PF screw up

I see Employee’s Provident Fund as just another financial instrument which invests primarily in debts and GoI backed bonds. Looking at the size and the magnitude of its corpus, all I can say is that its high time that there should be some accountability, transparency and professional management in this fund.

1) This year when the interest rates are touching 10% (10.5% for some cooperative banks) why is it that the EPFO office can generate only 8.25% returns on the investment?
2) Where is the Government pissing away the 2% RoI? (10.5 – 8.5%) Why is the AMC (asset management fees a high 2% .. when even mutual funds are happy with 1.5%)
3) What special and unforeseen circumstances have forced the Provident Fund office to dip into the reserves to pay this year’s interest?
4) Three months back they asked everybody to fill the Social Security number forms… What happened to them?
5) When was the last time EPFO gave you the account statement?

The government forces the employees to shell out a major portion of the salary into this scheme and then bully the industry to match the employee’s contribution (which they happily take out of the employee’s pay packet). So we need some answers!

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7 thoughts on “PF screw up

  1. actually i did go and check each and every financial details of the EPFO…
    over the past 3 years those stupid guys had swapped all the high interest rate debts for 6-7% interest rate ones… so most of the bonds they have pay a very low coupon rate of interest….
    what pisses me is that they charge 2% AMC when those morons do not know that at the time of interest rate rise you do not lock your money.

    neways any body that dips into its reserves (which it has been doing for the past 4 years) is bound to get into trouble… UTI did and now they will…. and then their sovereign guarantee will be put to test and more of taxpayers money will be pissed away in restructuring.

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  2. well it is not bad as seamans pf
    remember the big scam of HOME TRADE
    which used sachin t as their mascot

    yes the situation is bad cause they declare unsustainable returns of 8.5% on the current portfolio mix and return of 7% in govt sovereign bonds(i think)
    they are diggin into the reserves
    which means new people paying for old
    and they didnt swap debt they were forced to
    EPFO funds are managed by a committee including
    govt nominees ie BABUS and trade union leaders
    which means it is ruled by the cpim etc
    (as they control the upa in such aspects)
    and noone on the board has professional knowledge
    and no communist wants to invest even 5% in equity
    as recomended by kelkar committe
    after the hit they took when uti64 collapsed
    and people came to know that they invested in mkts!
    e
    nyways it wd be risky with the heavily inflated sensex

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  3. for 4 years the fund has been dipping into its reserves… and i doubt if it is even dipping into its principal to pay the interest rate.
    i do not invest in MF because I think paying 1.5% AMC fees is fleecing and GoI expect me to pay 2% AMC for a fund which has no professionals and all it does is collect the money and buy Govt Bonds?

    //yes the situation is bad cause they declare unsustainable returns of 8.5% on the current portfolio mix and return of 7% in govt sovereign bonds(i think)//
    as per the press release the investments are generating 8.25% RoI (but it did not clarify if it was before or after AMC)

    I do not want the EPFO to invest in stock market…
    1) they r incompetent.
    2) it has a sovereign guarantee… which can be misused to take higher risk and lose my capital base.

    all i want is that the office gives me the Bank’s FD or 1% less than that (which would be compensated by the tax sops) and it publish its statements in time…. but i guess it is too much to ask for… and not use the deposits to pay for the interests
    like social security… this scheme is also going to be a dud.

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  4. easier said than done
    meetings rnt even held properly
    dont know about amc charge but it goes
    into the govt pocket i think

    worse is that there is no organised debt mkt in this country,where they can invest
    and to be real there is no organisation here
    as most economic scamsters have hi poli conns
    plus laws are very lax on eco offences read
    http://www.rediff.com/money/2002/may/16sheth.htm
    did u read suchetas the scam ?
    regulators wake up that too partly – after big shocks comeon-even rbi was neck deep in the gtb scam
    they declared alls well and lo the bank fell
    this made me a big fan of soros!
    no action has ever been taken be it the nbfc fd scam
    the plantations scam the stk mkt scams etc
    mind u citibank was also neck deep in the harshad mehta scam !

    lastly the goi/finmin uses mkts as soft targets for tax and kills the mkts thru excessive tax collections

    mf yes they are expensive but a few are quite good
    so is nsdl cause they charge 10 to 15 bucks a transaction which suks !

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  5. //dont know about amc charge but it goes
    into the govt pocket i think//
    no salaries of babus who still use ledger and typewriter instead of computers. govt gets no monetary kickbacks.

    //did u read suchetas the scam ?//
    tell me about it.

    //lastly the goi/finmin uses mkts as soft targets for tax and kills the mkts thru excessive tax collections//
    yes and that is totally stupid… all my other investments are taxed at a lower capital gains rate/can benefit from inflation indexing… but interest is taxed at the peak 33.9%

    //mf yes they are expensive but a few are quite good//
    tell me about a single one whose returns have exceeded the sensex for 5 consecutive years (i believe if i buy mf its for long term… not buy today sell tomorrow types)

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  6. thanx for the info
    tell me dont most personal inc taxes go into
    the salaries of the tax administrators?
    and cause the taxpayer is superaccountable
    not the ITO who is rather unaccountable, most of them have very high undeclared incomes from other sources

    yup mfs are for investin in long term
    zurich prudence or hdfc prudence was a good one
    there are still some funds bettering the sensex
    dont track much now
    better still if u can afford it is pms
    but they are no guarantee either
    best is to buy 10 good stocks and wait and track
    8 would not be big winners 2 will
    thats the magic of Warren Buffett, George Soros

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