"The real rate of returns on provident funds is 2.75 per cent, lower than the return of OECD countries which ranged from six to nine per cent," Dave, who heads the committee on old age social and income security (OASIS) set up by the Ministry of Social Welfare said.

Investing a portion of provident fund amount in equities would ensure a return more than nine per cent by least conservative estimates, Dave said at a workshop on pension schemes organised by Federation of Indian Chambers of Commerce and Industry (Ficci) here.

Dave, former Chairman of Unit Trust of India (UTI) said if Rs five were collected daily for a public provident fund scheme carrying an interest rate of 12 per cent, the accumulation after 35 years will work out to Rs 7-8 lakhs.

If this amount is being put to indexed funds of Bombay StockExchange (BSE) stock for 35 years without any trading, the accumulation would swell into Rs 35 lakhs, he said.

This explains the quantum of returns that can be enhanced, if provident funds are allowed to be invested in instruments other than public sector bonds and government securities.