As a PF account holder, it’s crucial to understand the differences and benefits of Pension and PF schemes. You can confidently compare and contrast these investment options to make informed decisions about your financial future.
Provident Fund is a government-organized scheme, which includes a Public Provident Fund, Employee Provident Fund, General Provident Fund and Pension Scheme. This may introduce to benefit the employee after their retirement by having every scheme by its own specification.
Pension scheme may opted for by any employee who is having an account in a provident fund. General Provident Fund further opted after having reached a maximum limit in Employee or Public PF account, whereas the Pension scheme opted anytime by an individual.
Differences between PF and Pension Scheme
Read for yourself the literal meanings and the reasoning that differ between these two schemes.
General Provident Fund
Any Government employee or individual who enroll with the Employee Provident Fund or Public provident Fund, has only one way to contribute a 12% of their basic salary every month. In order to increase the amount of contribution, they can opt General Provident Fund by opening the GPF account themselves.
GPF at retirement is tax-free and unlike Pension schemes, the individual can withdraw the amount whenever required. The maturity period also the age of retirement, but half the amount may withdrawn by proving GPF advance application.
National Pension Scheme
National Pension Scheme is an optional scheme for every employee who enrolled with the Provident Fund. NPS may obtained by any Indian citizen and the total amount accumulated in the pension account will only be eligible for withdrawal at the age of retirement or time of maturity.
This amount which contributed by the Individual Pension Scheme holder invested in Bonds, Shares and Mutual funds by the government. Debt liability for the NPS is zero and the entire amount at time of maturity is tax free. These schemes bring a 10% higher return when compared with General Provident Fund.
Difference between GPF and Pension Scheme?
The major difference between them would be GPF only requires 6% of the employee contribution where as for Pension scheme, the employee during their working year should contribute to 12% of their basic salary.
Can EPF be transferred to GPF?
GPF is a great scheme that requires lower contributions from employees. However, it’s important to note that EPF funds cannot be transferred to GPF and utilized for pension purposes.