What is PF?
Provident Fund (PF) is a government-guaranteed savings scheme that helps employees build financial security for their retirement years. Under this system, both the employee and the employer contribute a fixed portion of the employee’s salary every month, and the scheme is managed by the Employees’ Provident Fund Organisation (EPFO). By encouraging disciplined, long-term savings, PF ensures a steady income stream after retirement and works best when planned alongside other long-term financial safeguards such as life insurance.
Workings of PF
Monthly Contributions
Both workers and employers need to make monthly payments to PF. Workers contribute 12% of their basic salary. This is in addition to the dearness allowance (DA) to the PF account every month.
Employers also pay 12% of the basic salary. But 8.33% of it is transferred to the Employees’ Pension Scheme (EPS). The remaining amount is deposited into the employee’s PF account. You can find more information by typing what is PF? Online.
Interest on PF Savings
The interest rate is declared by the government on a yearly basis, and the accumulated amount gets compound interest, so it becomes a good retirement fund.
Voluntary Provident Fund (VPF)
In the case of the Voluntary Provident Fund, employees can contribute above the compulsory 12%. This is subject to the same rate of interest and enjoys the extra benefits of savings.
Procedure for checking PF balance
There are various ways in which employees can check their PF balance. They can log in to their EPFO Portal by providing their UAN login. They can also use the UMANG app to figure out their PF balance. It also enables withdrawal of PF money.
People can also use SMS or missed calls in a prescribed format to the EPFP helpline number to get more information.
When Can You Withdraw PF?
There are cases when PF can be withdrawn. One is at the time of retirement. Employees are allowed to withdraw part of their PF for certain reasons:
- Marriage or education (after 7 years of service).
- Home buying or building (after 5 years of service).
- Medical emergencies (no minimum service necessary).
In case an employee is unemployed for two months or more, he can withdraw 75% of his PF balance.
Long-Term Advantages of Saving in PF
- PF provides a consistent income after retirement, minimizing financial dependence.
- Contribution, interest, and withdrawals (after 5 years) are exempt under Section 80C of the Income Tax Act.
- The PF corpus accumulates immensely by the compounding factor, generating a handsome retirement corpus.
- Whereas stocks or mutual funds entail risks and volatility, PF is risk-free as well as returns-assured, being sponsored by the government.
Suggestions for a Robust Retirement Corpus
- It is better to avoid pre-withdrawal of PF
- It is always good to go for Voluntary PF, where you pay more than 12%
- Monitoring your balance helps you plan your financial objectives efficiently.
- Always ensure that the PF account contains a recent nominee for hassle-free processing of claims.
Conclusion
PF is among the best retirement savings solutions, providing security, tax advantages, and guaranteed returns. With disciplined contributions and no early withdrawals, workers can create a robust retirement corpus for a tension-free life.
