Demystifying Investment Opportunities for Retirement Fund

Abstract

As per Indian culture every individual is inculcated with the habit of saving money from early childhood. When the person takes up employment in an organization a part of his salary gets deducted as his/her contribution towards Provident Fund (PF). At the time of retirement, the amount accrued in the his/her PF is handed over to the employee as his/her social security. This article gives an insight on investment avenues that are used to generate a return on our savings and multiply the retirement fund of every employee over the years. The contribution of provident fund and interest thereon forms the retirement corpus of the individual. Further, this article throws light on how fund management activity can be carried out by a PF Trust. Efficiencies in fund management of a PF can be evaluated with the surplus generated by the PF, whether the PF Trust can credit the employee PF account by the pay-out rate declared by Employees’ Provident Fund Organisation (EPFO). The EPFO is one of the world's largest social security organizations and a retirement body that provides social security in India to the salaried class. It is similar to a 401 (k) plan which provides social security to employees in the US. The features of provident fund in India and 401(k) plan may vary. The guiding principle of the PF can be summed as safety, returns, and liquidity. Safety by investing in safe assets as permitted, returns which can be measured by being able to match EPFO pay-out rate and liquidity being assessed fund management skills of the investment officer managing the PF.