Subscribers can choose between government securities, equity investments, debt instruments, money market instruments and infrastructure investment trusts

The labour ministry is considering a policy that will give provident fund (PF) subscribers the flexibility to park their money in equity, debt or a combination of both, depending on their choice.

According to a report by The Economic Times, the draft policy suggests doing away with the existing cap on investments and giving 5 crore Employees’ Provident Fund Organisation (EPFO) subscribers the option of choosing their own investment pattern.

Subscribers can choose between four categories of investments — government securities, equity investments, debt instruments, money market instruments and infrastructure investment trusts — to decide where to park their money.

The policy aims at making the the PF investment structure something similar to the National Pension Scheme, which allows subscribers to invest in these four schemes in desired proportion, subject to overall caps.

“It could be fully in equity, partly invested in equity, or the entire fund kitty could be put in government securities or debt instruments, depending on the risk a subscriber is willing to take and the return he expects on his investments,” a government official told the newspaper.

The draft policy will be finalised after consulting with stakeholders, the report suggests.

Currently, the finance ministry prescribes the cap on investments under each head for non-governmental provident funds. In the existing pattern, up to 50 percent of the PF amount can be invested in government securities, while up to 45 percent can be invested in debt instruments.

Only up to 15 percent can be invested in equity markets and up to 5 percent each can be invested in money market instruments and infrastructure trusts.