Provident Fund is a whole lump sum amount of investment fund which is cordially contributed to by employers, employees and the state. Out of this investment, a certain revised round figure is given out to distinctive employees at retirement stage. This is an imperative initiation – wholly govt. run – that is regulated and supervised upon by the government itself using various retirement savings schemes and policy used in India, Singapore, Mexico, Hong Kong and Malaysia, etc. which stands parallel to the systems and parameters of functioning of the United States’ Social Security program.
It solely aims for the prosperity of each citizen in the country. It is a form of social safety where the workers proffer a part of their salary and the employers contribute on behalf of these workers. This money is thereafter paid out in cases of disables as well as retirees.
The government has set a particular age limit at which penalty-free withdrawals are permitted although considering various circumstances, pre-retirement withdrawals can also be allowed weighing the situation. Each and every provident fund is capable of setting its own minute (minimum) contribution level for the employers and workers depending upon their respective age groups.
Cases of Flexibility in Provident Fund System:
- If a worker is deceased prior receiving benefits the surviving spouse & children will be able to receive the survivors’ benefits from that provident fund.
- In the case of emigration – certain countries permit individuals to receive an early payout if they plan to emigrate to a different country.
- Similarly, individuals who work past the set minimum age of retirement age may be bound to face restricted and firm withdrawals until full and legit retirement period starts.
The PF Trust can be a continuous exercise within many distinctive organizations. Below are the most common challenges the administrators face;
- Investment Management
- Financial Accounting
- Self-Service access for employees
- Reporting and analysis tools & reminders
- Management of defined contribution, hybrid funds and gratuity plans, etc.
Rakesh wants to buy a two-bedroom apartment that costs Rs. 80 Lakhs. The two options in such a situation would be to go for advances/withdrawals from EPFO or go for a house loan whilst paying huge interest rates. This would end up being a long agendum.
One wise advice for him would be to go for an exempted PF Trust i.e. withdrawal of money from his PF account in a couple of days.
Hence, it is important that people understand the difference between PF Trust & EPF. People often confuse the concept of provident fund to employees’ provident fund as well. Below is a drawn comparison of the two to make your concepts clear;
How is PF Trust different and more preferable than EPF (Employees Provident Fund) Management?
- PF Trust customizes options and creates direct linkage to Employee Data with relevant software
- Transfer In & Out/Settlement in PF Trust Management solution
- Provides prompt withdrawals – no long procedures
- Enables quick revision of procedures
- Guarantees satisfaction post retirement
- Better and efficient supervision by PF Commissioners which ensure reliability
The Employees’ Provident Funds and Miscellaneous Provision Act was enacted and put into implementation on 4th March, in the year 1952. Following the act, three schemes were considered to be put in operation:
- Employees’ Deposit Linked Insurance Scheme – 1976
- Employees’ Provident Fund Scheme – 1952
- Employees’ Pension Scheme – 1995
Henceforth, post various amendments in the PFT system; the Government of India aims at providing what’s best for the entire nation and so far, has been succeeding tremendously. This system will ensure balanced investments and efficient returns, being highly beneficial to the society and respecting workforces –simultaneously remodeling the financial structure of each independent individual and advancing their livelihood.
You can speak to our Consultants for any further detailing on the Provident Fund Trust Management. Apart from that you can also speak to the Compliance team for any update on Provident fund Management. We can be reached on firstname.lastname@example.org.