For the salaried, the Employees’ Provident Fund (EPF) is an important product in the debt space to invest in for retirement. Therefore, the decision to increase the rate of interest from 8.75% to 8.80% should bring cheer. In a meeting of the Central Board of Trustees of the Employees’ Provident Fund Organization (EPFO) on Tuesday, 16 February, it was decided to hike the rate of interest to 8.8% for financial year (FY) 2016. The increase comes in an environment of falling interest rates. Moreover, it was announced that small savings rates will be recalibrated once a quarter.
What is EPF?
Every month, a salaried individual contributes 12% of her salary into the EPF account and the employer matches this. A part of the employer’s contribution goes to the Employees’ Pension Scheme. Contributions made to EPF compounds at a rate declared by the EPFO every year. For salaries above Rs.15,000 a month, EPF is a voluntary scheme. As a voluntary member, you can choose to opt out in the beginning, but not midway or when transferring an account.
