The Employees’ Provident Fund or EPF is a social security scheme that has offered retirement benefits to blue and white-collar workers alike in India since 1952. It offers guaranteed returns and a safety cover for all employees working in any organisation where the number of employees is more than 20.
EPF contribution
The EPF account gets contributions from two streams – 12% of the Basic Salary and DA of an employee and 3.67% of the same amount (basic salary + DA). An amount equal to 8.33% of basic salary + DA from the employers goes into a pension account that the employee would get after he/she retires from service. The pension account, too, is maintained and managed by the Employee’s Provident Fund Organisation (EPFO).
EPF calculator
Now let’s turn to the calculation. Let’s make the following assumptions. A youth begins contributing to the EPF account from the age of 25 years. He/she gets a Basic + DA of Rs 25,000. Let’s assume the rate of increment he/she manages to get is 10%. The rate of interest that is applicable to the EPF account stays at 8.25%.
With these assumptions, an employee can reach the coveted Rs 1 crore corpus in the EPF account when he/she is just 48 years of age. The amount would stand at Rs 1.08 crore when the employee reaches that age. By the way, if the same assumptions hold good, the employee will amass Rs 3.83 crore when he/she turns 58.
Increment at 5%
But life is not a bed of roses. And it will not really possible that an employee would keep raking in 10% increment every year. Therefore, let’s pare down the rate of increment to just 5%. With all other assumptions – the rate of interest 8.25% and contributions beginning at 25 years – an employee would reach the Rs 1 crore corpus at the age of 53 years. The total amount in his/her EPF account would be Rs 1.06 crore in this case.
Increment at 3%
If the rate of increment is still reduced to 3%, the employee can still reach Rs 1 crore much before the retirement age of 58 years. In fact, he/she can create Rs 1 crore corpus at the age of 55 years.
The Employees’ Provident Fund is a social security scheme that multiplies the contributions of both the employee and the employer. The pension part of the EPF is also moving towards an upward revision. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
