Employee future fund organization
If you work in a company and your salary cuts PF every month, then the question will definitely come to your mind that where does this money go? Does it remain in one account or invest somewhere? EPFO i.e. Employees Provident Fund Organization not only collects this money, but also invests it in fixed ways so that you can get a good amount and pension at the time of retirement.
PF money is divided into three parts
Under the EPF scheme, both employees and employers have to contribute 12% of the basic salary every month.
1- Contribution of employee
The 12% deducted from your salary goes to your EPF account. Interest is also available on this every year and this money is completely deposited in your name.
2- Contribution of employers
The 12% amount deposited by the employer is divided into three parts.
- 8.33% share in EPS (Pension Scheme)
- 3.67% share in EPF account
- In addition, a separate contribution is also in EDLI (insurance scheme)
For example, if your basic salary is ₹ 16,000, then ₹ 1,920- ₹ 1,920 will be contributed from both sides. Out of this, only ₹ 587 will be seen in the EPF from the employer, the rest will go to the pension and insurance scheme.
Where does EPFO invest your money?
- EPFO, the amount deposited in your PF account, does not keep cash directly with itself. He invests this amount in schemes where there is a possibility of safe and stable returns.
- Government bonds and securities: the safest investment, where the default is not at risk
- ETF (Exchange Traded Fund): For the last few years, EPFO has started putting 15% of its funds in ETF connected to the stock market.
This is also the benefit of pension and insurance
The 8.33% stake in the EPS (Employees’ Pension Scheme from the employer is the basis of the monthly pension after your retirement. If you have contributed continuously to the EPF scheme for 10 years, then after the age of 58 you can start getting pension. Apart from this, the family also gets the benefit of insurance on the untimely death of the employee under the EDLI scheme. This contribution is also made by the employer.
When can you withdraw EPS amount?
If you have done jobs less than 10 years and are closing the PF account, then the share of EPS can be removed by filling the form 10C. But after serving 10 years or more, you cannot withdraw EPS money, but become entitled to pension in future.
Why is EPF scheme important?
The entire plan of EPFO is based on the idea that after retirement, the employee should get regular income like not only a lump sum, but also regular income like monthly pension.
Therefore, a part of your PF goes into schemes like pension and insurance. The EPFO manages investment in such a way that the returns remain stable and the risks are minimal.