The salaried class of India, which comprises of the middle class and upper middle class of Indians, is facing tough times as the central government has decided to cut down the Employee Provident Fund (EPF) interest rate to 8.55%. Incidentally, EPF corpus for retirement is a big help and people are dependent on it. At this present juncture of time, when EPF interest rate is at a 5-year low, individuals need to explore new avenues in best interests of their terminal life. EPF is mandatory, so there is no way to escape the brunt of it but definitely, there are avenues to diversify savings with a calculated planned approach.
Diversifying in Public Provident Fund (PPF) is always a good option, even if PPF interest rate is also going down. But tax exemption is something which makes PPF account still a safe and a lucrative choice. PPF account is for 15 years and individuals need to reinvest after that and this is where they lag behind in terms of retirement funds.
National Pension System (NPS) is also a good option and recently there has been a relaxation in NPS withdrawal rules. Nowadays, even transferring money from EPF to NPS is much simpler. For the transfer, individuals need to have tier 1 accounts initially whereas later they can definitely afford to have tier 2 accounts. Not only that, tax benefits can be claimed in case of three types of deduction against NPS investments. Anyhow, it is time to look beyond PPF and EPF and take the right step forward which will ensure a healthy and hassle-free retired life.
There is no denying the fact that automating savings by taking the SIP route is always a decent option. Side by side, allocating additional income to savings is a smart choice any day. Meanwhile, it is the duty of the investor to monitor the performance of the retirement portfolio time to time. Even in post LTCG tax regime, mutual fund arena is still a trusted bet for working professionals nearing retirement.