Latest news with #EPFs
Time of India
3 days ago
- Business
- Time of India
Tax-free, risk-free, and effort-free. But CA says many employees make mistakes that cost lakhs in lost savings
You may think you are investing smart, but you are actually losing out on earning crores and a life of early retirement. Taking to X, chartered accountant Nitin Kaushik explained that while stocks and mutual funds may promise a higher return, employee provident funds (EPFs) are an underrated earning tool that guarantees steady earnings but are overlooked by most. Understanding the Basics of EPF The Employees' Provident Fund, often dismissed as a routine salary deduction, is actually a government-backed savings tool that quietly builds long-term wealth, argued the CA. Under this scheme, 12% of your basic monthly salary is automatically contributed towards your EPF. What most people don't fully appreciate is that your employer is also legally required to contribute an equivalent amount, essentially giving you an additional 12% in free savings every month. Explore courses from Top Institutes in Select a Course Category healthcare Finance CXO Data Analytics Data Science Product Management Artificial Intelligence Others Leadership Data Science MCA Healthcare Cybersecurity Management MBA Degree Operations Management Design Thinking Digital Marketing Technology Project Management Public Policy others PGDM Skills you'll gain: Duration: 11 Months IIM Lucknow CERT-IIML Healthcare Management India Starts on undefined Get Details — Finance_Bareek (@Finance_Bareek) For the financial year 2024–25, EPF contributions earn an annual interest of 8.15%. These returns are not only guaranteed by the government but also entirely exempt from income tax. With no requirement for personal effort, trading knowledge, or app-based management, EPF emerges as one of the most secure ways to accumulate retirement funds. The Long-Term Value: Simple Calculations with Major Impact Kaushik explained that an individual with a basic monthly salary of Rs 40,000 contributes Rs 4,800 to EPF. Their employer adds another Rs 4,800, making the total monthly contribution Rs 9,600. At the current interest rate of 8.15%, this individual could accumulate Rs 1.02 crore in 25 years—without including future salary increases. This significant sum is built passively, without the stress of tracking markets or fearing losses. Unlike investments requiring active management, EPF simply compounds in the background, steadily building wealth while you go about your daily life. Why EPF Outperforms Many Investment Alternatives There are several reasons why EPF outshines traditional savings and even many stock market portfolios, stated Kaushik: The interest earned is tax-free It typically offers higher returns than fixed deposits It is not exposed to stock market volatility It builds a habit of disciplined saving The employer's contribution accelerates compounding It eliminates emotional investment decisions such as panic-selling or timing the market These factors combined make EPF an incredibly strong foundation for long-term wealth creation . Common Mistakes That Cost You Dearly Despite the numerous advantages, many individuals fail to fully leverage the EPF system. Some of the most frequent and financially damaging missteps include Withdrawing EPF funds prematurely Neglecting dormant or past EPF accounts Not activating their Universal Account Number (UAN) Failing to update Know Your Customer (KYC) details Ignoring EPF balances after switching jobs These mistakes often lead to lost savings that could have significantly boosted one's retirement fund. When Is EPF Withdrawal Allowed? While EPF is designed as a retirement fund, there are specific scenarios where early withdrawals are permitted. These include: Funding a marriage (self or family) Paying for medical treatment Buying or constructing a house Pursuing education Facing unemployment for more than two months Permanent relocation to another country Even with these allowances, early withdrawal should be a carefully considered decision given its long-term impact on retirement savings. Who Should Invest in EPF? EPF is mandatory for salaried individuals whose basic income is ₹15,000 or less and who work in organisations with 20 or more employees. However, even high-income earners can voluntarily participate by informing their human resources department to activate or maintain their UAN. Choosing to stay invested in EPF can help high earners diversify their portfolio with a low-risk, stable growth component. The Debate: Stocks vs. EPF While stock investments may offer higher returns for those who are financially savvy, they come with considerable risks and require active monitoring, said the CA. For the average person unfamiliar with market fluctuations, EPF offers a reliable, low-stress path to wealth creation. Choosing stocks without expertise is akin to saying you prefer homemade meals but eating out daily—it sounds appealing but doesn't reflect consistent long-term discipline. EPF's Real Strength Lies in Stability Ultimately, EPF is not about exciting returns or beating the market. It's about providing Reliable, tax-free growth A steady stream of contributions from your employer Financial security without the stress of managing investments A disciplined savings routine Long-term peace of mind In an investment landscape full of noise and volatility, EPF stands out as a quiet, consistent performer — and a powerful tool for anyone aiming for a secure and early retirement.
Business Recorder
03-07-2025
- Business
- Business Recorder
SECP proposes amendments in Voluntary Pension System Rules, 2005
ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed amendments in Voluntary Pension System Rules, 2005, aiming to align the regulatory framework more closely with international best practices, eliminate interpretational ambiguities, and foster a stronger culture of retirement savings in Pakistan. The consultation paper is being published for the purpose of eliciting public comments on the draft amendments proposed in Voluntary Pension System Rules, 2005. According to the SECP, the VPS Rules, 2005 were last amended through S.R.O. 298(I)/2024, dated February 22, 2024. Major amendments entailed the introduction of the Employer Pension Fund, which enabled organisations to set up dedicated pension funds managed by registered pension fund managers for the exclusive benefit of their employees. This marked a structural shift in Pakistan's retirement landscape by allowing employers to make systematic, tax-efficient contributions toward their employees' retirement, improving transparency, portability, and long-term fund accumulation under a regulated framework. Govt introduces 'Contributory Pension Fund Scheme' for new entrants Subsequent to the aforesaid notification, the SECP has initiated an impact analysis to assess the efficacy of the VPS Rules in addressing the evolving dynamics of retirement savings. Various areas of improvement have been resultantly identified to provide operational efficiency, broader pension coverage, and to reduce entry barriers for employer participation. The proposed draft amendments aim to align the regulatory framework more closely with international best practices, eliminate interpretational ambiguities, and foster a stronger culture of retirement savings in Pakistan. SECP found that while the introduction of Employer Pension Funds (EPFs) under the VPS Rules, 2005 marked a significant milestone in expanding the retirement savings framework, certain structural limitations continue to restrict their scalability and broader market adoption. The current structure restricts each fund to a specific employer—limiting scalability and creating cost inefficiencies, particularly for smaller employers. Opening EPFs to multiple employers could address these inefficiencies by allowing pension fund managers to pool contributions from various employers into a single fund structure. This would not only improve cost-effectiveness through economies of scale but also enable smaller employers to offer retirement benefits without bearing the full burden of establishing a dedicated fund, according to the SECP. Additionally, opening the existing common fund structure to employer contributions addresses a critical gap in the current system by offering a streamlined channel for employer involvement without requiring new fund formation. This approach leverages existing regulatory and operational infrastructure to provide immediate access for employers—particularly those with smaller workforces or limited administrative capacity. By enabling contributions within an already functioning and compliant framework, it minimizes setup costs, reduces entry barriers, and ensures consistency in oversight. This can encourage broader and faster adoption of retirement savings, improve fund scale and efficiency through aggregated inflows.
