What is PF? A Simple Introduction to Savings, Pension and Insurance
What is PF, and why is it deducted from your salary every month? If you have recently started working or are learning payroll, this is a useful blog to begin.
Most people know PF as money saved for retirement. However, the system also includes pension and insurance schemes that can support eligible employees and their families.
What is PF and Why Does It Matter?
PF stands for Provident Fund. In the workplace, people commonly use “PF” to mean the Employees’ Provident Fund (EPF). In India, EPF is administered by the Employees’ Provident Fund Organisation (EPFO).
EPF helps eligible employees save regularly during their working years. The employee contributes from their wages, and the employer contributes too.
It forms part of the social security framework for employees. Simply put, social security means financial support for situations such as retirement, disability or the loss of an earning family member, subject to the relevant scheme’s rules.
How PF Helps Employees and Their Families
The EPFO system includes three schemes with different purposes:
Scheme | Main purpose |
EPF — Employees’ Provident Fund | Builds savings for the employee’s future. |
EPS — Employees’ Pension Scheme | Provides pension benefits to eligible members and families. |
EDLI — Employees’ Deposit Linked Insurance | Provides insurance assistance to eligible beneficiaries when a covered employee dies while in service. |
EPF: Building Savings During Your Working Years
The contributions credited to your EPF account gradually build a savings balance. Interest is added according to the applicable rules. For example, when contributions are deposited regularly throughout your employment, your savings grow through those deposits and the interest credited to the account.
This money can help meet expenses after retirement. The scheme also permits withdrawals or advances for specified needs, subject to conditions.
EPS: Monthly Pension for Eligible Members
The Employees’ Pension Scheme (EPS) provides a monthly pension to members who meet its eligibility requirements.
While EPF builds a savings balance, EPS provides regular pension income after retirement.
The pension amount depends on pensionable salary, pensionable service and the applicable rules. EPS also provides benefits in eligible disability and family pension cases. Depending on the circumstances, a surviving spouse and children may qualify for pension support.
EDLI: Financial Assistance for the Family
The Employees’ Deposit Linked Insurance (EDLI) scheme provides a lump-sum insurance benefit to eligible beneficiaries if a covered employee dies while in service. Losing an earning family member can create immediate financial difficulties. This benefit offers some financial assistance during that time.The amount payable and the beneficiaries entitled to receive it are determined by the scheme’s rules.
Understanding PF helps you read your salary slip and know the purpose of the money being contributed. EPF helps build savings. EPS provides pension benefits to those who qualify. EDLI offers insurance assistance to eligible beneficiaries. Each scheme has its own conditions, so the benefits available may differ from one employee to another.
