The Employees' Provident Fund (EPF) is designed to help workers build a retirement corpus through regular contributions from both the employee and employer. Under the rules, each contributes 12 per cent of applicable wages to the fund.
Employees can also make additional voluntary contributions to their EPF beyond the mandatory deduction. The savings earn interest over time, allowing the corpus to grow through compounding.
However, EPF contributions can stop when an employee resigns or leaves a job. While the existing balance remains in the account, the absence of fresh contributions can affect how quickly the retirement corpus grows.
ALSO READ: Have Rs 10 Lakh In Your EPF? Should You Withdraw It Or Let It Compound For Retirement?
What Happens To Rs 10 Lakh Without Any Fresh Contributions?
A Rs 10 lakh provident fund corpus could still grow significantly at the current interest rate of 8.25% per annum even if no fresh contributions are made.
Initial EPF balance: Rs 10 lakh
Tenure: 15 years
Current EPF interest rate: 8.25% per year
Estimated interest earned: Rs 22.84 lakh
Total corpus after 15 years: Rs 32.84 lakh
The amount could vary depending on the change in EPF interest rate. However, if there were fresh contributions, the corpus would have been higher.
The calculation indicates how retirement savings need periodic contributions so that the corpus can be increased through compounding.
Will My EPF Account Become Inoperative After No Fresh Contributions?
An EPF account is considered inoperative if no contributions have been made for three years after retirement or permanent migration abroad or in case of death. All PF accounts will earn interest until the member is 58 years of age.
In case employees have a new EPF account, they need to get the PF amount transferred into their new account either through online or offline mode. In case of retirement, workers can withdraw their PF corpus.
ALSO READ: Have Rs 10 Lakh In EPF? How Much Could Your PF Corpus Become In 10 Years If You Don't Withdraw?
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.