How VPF Can Boost Your Retirement Kitty

Voluntary Provident Fund is easy to invest in, and tax-efficient

- Satya Sontanam

Are you saving enough towards your retirement kitty? If you are a salaried employee, you may already be investing in the Employees’ Provident Fund (EPF) that can help you create a tidy nest egg. But what if this does not suffice for your post-retirement requirement? While you cannot increase your EPF contribution beyond a level, voluntary provident fund (VPF) — an add-on to your run-of-the-mill EPF — can get you closer to your nest egg.

Here’s a lowdown on this fixed income option.

Attractive rates

VPF is one of the best avenues to save up for retirement, under fixed income options. It is the voluntary contribution made by the employee beyond the EPF contribution. If you are a salaried employee, 12 per cent of your basic and dearness allowance is automatically deducted monthly towards your EPF contribution. The employer makes an equal contribution.

Since you cannot increase your EPF contribution beyond this level, you can consider investing your surplus in VPF. The maximum contribution towards VPF is 100 per cent of the basic salary and dearness allowance. Note that, unlike EPF, where your employer makes an equal contribution, in VPF there is no such matching contribution from the employer.

So, why is VPF an attractive option?

VPF fetches you similar rate on your investment as your EPF contribution. The Employees’ Provident Fund Organisation (EPFO) sets the interest rate on EPF every year, based on the surplus it makes in a year. The rate so far has been set higher than other similar options, making EPF and, in turn, VPF an attractive investment.