Picking The Right Fund

While PPF and EPF are secure funds, VPF is ahead in the race for the top slot

- M Rajendran And Nirmala Konjengbam

When it comes to financial security, traditional savings instruments like Public Provident Fund (PPF) and Employees’ Provident Fund (EPF) are popular tax-saving retirement plans. Despite falling rates of interest, these two schemes have been around for more than six decades. Both are long-drawn, but secure investment choices. But how many invest in the other government fund - Voluntary Provident Fund (VPF)?

For many years, Prunita Thingujam, who works with navigation map company Mapmyindia in New Delhi, has been investing in EPF. By investing in EPF, the 28-year-old saves 12 percent of her basic and dearness allowance every month, to which her employer makes a matching contribution of 12 percent. “EPF is the easiest and best option,” she says.

But as interest rates in EPF are falling, Thingujam is now looking for a better alternative. “I am planning to switch to VPF or Unit Linked Insurance Plan (ULIP) insurance plan. I want to start a small investment where I can get average to high returns,” she says. EPF interest rates have fallen from 8.8 percent in 2015-16 to 8.65 percent in 2016-17.

Not many people have heard or know how Voluntary Provident Fund works. According to Naveen Wadhwa, Deputy General Manager, Taxmann, investors are looking for alternative saving options. Funds like EPF are losing favour among salaried individuals because employers are behind schedule in making their part of contribution on time. “Many employees have started to look at other tax-free investment options and we see people moving towards VPF,” says Wadhwa.

According to Raj Birbal, a senior Supreme Court advocate, a recent court order in an EPF case, stated that “Companies can restrict contribution of 12 percent EPF on an amount ₹15,000, if the salary of an employee is running beyond the statutory prescribed limit.”

VPF/PPF Benefits