In India, the Employee Provident Fund (EPF) or the Provident Fund (PF) is considered to be one of the essential tools to retirement planning. EPF is a mandatory government-backed retirement savings scheme. Employee’s working in organization housing more than 20 employees need to contribute 12% of their basic salary.
The employer gives an equal contribution and deposits it to the employee’s PF account. Once the employee retires or resigns from the company, the accrued sum is payable to the employee. The PF is managed and governed by the Employee’s Provident Fund Organization (EPFO) under the government of India.
How Does PF Work?
When the employee and the employer contribute to the PF account, 3.67% of the employer’s share goes to the PF account while the remaining 8.33% goes to the Employee’s Pension Scheme (EPF). All the accumulated fund is invested wherein an 8% – 12% interest is gained. This rate of interest is decided by the central board and the government of India.
You can either withdraw the PF amount when you retire or when you resign from the company. In case you resign from the company before the completion of 5 years of continuous service, the accrued money is subject to taxes. However, if you opt to transfer your EPF from old account to the new one, and complete five years (in both the company’s together), the withdrawn money will be completely tax-free.
Where is the Provident Fund Invested?
The EPFO invests the funds accumulated in the PF accounts in the following way:
- The funds collected in the Provident Fund (PF) Account are invested in different highly secure debt instruments that promise guaranteed returns.
- 35% of the PF is invested in debt instruments issued by banks and other financial institutions.
- Also, EPFOs invest 45% of the accumulated funds in government securities.
Should You Invest in Other Investment Instruments?
The returns gained from PF alone could not be sufficient for a decent living post-retirement. To meet this requirement, you can consider investing in secure investment instruments like Fixed Deposit (FD). Premium Non-Banking Financial Companies (NBFCs) like Bajaj Finance offers the highest interest rates on investment in FD ranging from 8.75% to 9.10%. You can double your corpus from PF and FD and enjoy your post-retirement years without any financial stress.
Also, if you have reached your retirement age and you want to grow your retirement corpus, you can invest in Senior Citizen FD. Bajaj Finance offers 0.35% hike in Senior Citizen Fixed Deposit Interest Rates compared to the standard FD interest rates. Following some of the additional benefits of investing in FD with Bajaj Finance:
- Guaranteed investment returns
- No influence of market rate fluctuations
- Flexible tenor between 12 months and 60 months
- Option to choose the interest payout frequency
- Option to select the type of FD from cumulative and non-cumulative FD
- Higher interest rates with every FD renewal
- Partial withdrawal facility with penalty charges
- Loan against FD wherein you can utilize up to 90% of the accrued sum
- Online and offline direct assistance available round the clock
- Quick online application procedure from anywhere around the globe
- Minimal documentation required for the hassle-free application process
- High security assured with CRISIL’s FAAA and ICRA’s MAAA accreditation
- Online access to FD account to keep you up to date about your account activity
You can check out your eligibility from the website as well as calculate your FD interest rates and maturity returns using the online FD calculator. To maintain liquidity from your investments, you can consider FD laddering unlike the Provident Fund (PF). In FD laddering, you can open multiple FD accounts at the same time with different tenors. By doing so, you can also eliminate the risk of premature withdrawal. Build your retirement corpus with the right investment tool from Bajaj Finance!