Retirement is that stage when you say goodbye to active employment and, therefore, regular incomes. After retirement, your income stops but your expenses don’t. That is why a corpus is needed to fund for the expenses which incur after you retire and a retirement fund comes into the picture.
You can create retirement funds in many different ways but among the different avenues, three avenues are very popular among individuals. These are the EPF scheme, PPF scheme, and GPF scheme. All three types of schemes are schemes of provident fund and so many of you don’t understand the difference between them. In reality, however, these schemes are quite different from each other. Let’s understand the basic differences between the three –
| Points of difference | EPF | PPF | GPF |
| Full form | Employees’ Provident Fund | Public Provident Fund | General Provident Fund |
| Investment rule | EPF investments are compulsory for employees and employers if the size of the organization is more than 20 employees | Investment is voluntary and is done by the general public. Employees contributing to EPF can also opt for PPF. A PPF account can be opened by individuals in their name or on behalf of minors | GPF is meant for Government employees and contribution is done only by the employees, not the employer. The scheme is also compulsory for Government employees |
| Amount of investment | 12% of the basic salary and dearness allowance is invested in the EPF account by both the employer and the employee. Investment is done every month | The minimum investment is INR 500 and the maximum is up to INR 1.5 lakhs. Investment can be done in one lump sum or in a maximum of 12 monthly installments | Monthly investments are made only by the employee. The minimum investment is 6% of the emoluments and maximum is the basic pay of the employee |
| Interest rate | For the financial year 2017-18, the rate is 8.55% per annum | For the financial year 2017-18, the rate is 8% per annum | For the financial year 2017-18, the rate is 8% per annum |
| Tenure of investment | Minimum lock-in period is 5 years. Withdrawals are, however, allowed for specific purposes. The account matures when the employee attains 58 years of age | Minimum lock-in period is 15 years which can also be stretched further in 5-year blocks. Partial withdrawals are allowed every year from the 7th year | Contributions continue till 3 months before the date of retirement of the employee. Withdrawals are allowed for meeting specified financial obligations |
| Premature closing of the account | If the employee is unemployed for 2 months, the account can be closed prematurely | The account can be closed prematurely after 5 years in case of medical emergencies or for higher education of children | The account can be closed prematurely only if the employee leaves Government employment |
Thus, EPF, PPF and GPF schemes, though meant for retirement funding, are technically different from one another. However, all three schemes give you tax benefits. The investments done in the scheme, the interest earned and the accumulated corpus at the end of the investment tenure are tax-free. So, choose a scheme as per suitability and build a retirement corpus with guaranteed returns.
