Tip Tuesdays: The Voluntary Provident Fund (VPF) and Why You Should Seriously Consider It

by Vinaya HS on March 3, 2009

in Finance

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This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her post below proves the opposite. This story-style post on personal finance is the first of its kind on this blog and is the perfect complement to my posts on EPF.

In 1993, Mr. and Mrs. Parasher, aged 45 and 43 respectively, both government employees had just paid off their home loan. They had three children — a son studying in class eight and twin daughters studying in class five. Although Mr. Parasher was setting aside small amounts for retirement for some time, it was now that he thought is the right time to start serious retirement planning.

At that point, Mr. Parasher’s basic pay was about Rs 5,000 per month. 12% of his basic was being cut from his monthly gross towards EPF, his company was contributing an equal amount, with the total contributions being compounded at 8-9% every year (variable annually).

The first step Mr. Parasher took to secure his retired life was to voluntarily contribute to his EPF account over and above the standard 12%. He increased his contribution to EPF to about 18% (12% EPF + 6% VPF) of his basic. The company still contributed 12% of the basic. With time came promotions and salary hikes. He took advantage of this and gradually increased his VPF percentage.

In 2000, Mrs. Parasher took a voluntary retirement from service and that fetched her a sum of rupees seven lakhs. At that time, their son was pursuing Engineering degree and the daughters were still in school. The Parashers set aside this money for their daughters’ education and marriage.

Early last year, in 2008, Mr. Parasher retired. At that time, his basic pay was about Rs 25,000 per month and his VPF contribution was about 80% of the basic. He now draws a pension amount of over Rs 22,000 a month — good enough to lead a decent lifestyle.

VPF or Voluntary Provident Fund is not applicable only to pensionable jobs. Since the PF interest is compounded annually, it is a good idea to contribute over and above the EPF and transfer the account when you move across companies. You will have a sizable sum at the end of your work life.

Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.

Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 17 comments… read them below or add one }

shilpa March 3, 2009 at 8:23 AM

Hey V,
Thanks for letting me write for your blog.


Chirag March 3, 2009 at 11:31 AM

Came here from Shilpa’s blog.

Thanks for the info man. I was struggling with my PF too. My previous company is doing all kinds of drama. Wish this were simpler, its my money after all.

Vinaya HS March 3, 2009 at 1:48 PM

@Shilpa: I should be the one doing the thanking!

@Chirag: Glad to be of help.

Jayant March 26, 2009 at 9:44 AM

Stop flirting guys ;) and get real ..

j.peter June 5, 2009 at 10:09 AM


Blessed is he that cinsidereth the poor …….ps:41;1

Dear Sir.
We are doing Village vision ministries past 30 years in tamilnadu state India. In our village vision ministries, lot of people were blessed by our jesus. We are helping orphanage widows elder people who were living below the poverty line. Under our village ministries 21 churches we are running successfully throughout tamilnadu. And we are having land to built churches. Our aim is spread our Christianity who were not knowing our jesus and helping to poor people. Our wonderful god has given me gift lot of miracles were happened in our ministries. Who were suffered by diseases like Asthuma,kidney cancer eye problem they were all left by doctors. They came to our village vision ministries all of them were cured and the people suffered by devils were cured.They were living happily. One kind request to you sir, please come to India and visit our village vision ministries. Our e mail :villagevision@yahoo.co.in and jeremiah_p2000@yahoo.com and p.jeremiah3@gmail.com.

God bless you

Thanking you,
Yours lovingly,
J. peter


S.K.SRIVASTAVA July 31, 2009 at 5:33 PM

I had started contribution in V.P.F from 2007-2008 and it will be continuous up to 2009-2010. If i want to withdrawl my V.P.F from when I can withdraw it.

Shriram Deo October 1, 2009 at 4:40 PM

Dear Sir / Madam,

I have one query :

1. I wish to invest in VPF for 100% of my basic. Is it possible to contribute 100% of my basic in VPF . If yes, pls let me know what is the time frame, I would have to inform PF commissioner or I would have to obtain permission to contribute the same.

I would appreciate your early reply in this regard.


Shriram Deo

RL Narayanan April 12, 2010 at 10:18 PM

how much vpf contribution an employee can contribute? is VPF is tax free? What is the procedure if one want to withdraw VPF?

RL Narayanan April 12, 2010 at 10:19 PM

what is the interest recivable on VPF?

M.V.S Rama Krishna April 23, 2010 at 2:14 PM

I am Contributing an amount of Rs 5000 towards VPF.Is it advisable to contribute that amount towards VPF.What is the procedure if i want to withdraw from this option.pls suggestion is urgently required.

M.V.S Rama Krishna April 23, 2010 at 2:20 PM

Is it better to contribute a part of the salary towards Voluntary Provident Fund or towards Public Provident Fund.which one is better

M.V.S Rama Krishna April 23, 2010 at 2:22 PM

Right now i want to transfer my salary contribution from Voluntary PF to Public Provident Fund.Is it possible or not.Pls suggest me.

kulmit July 13, 2010 at 3:31 PM

form for Voluntary Contribution of PF , procedure to follow

Ishita September 4, 2011 at 1:21 AM

Major dif­fer­ence between VPF and PPF is the rate of return.Rate of inter­est on VPF is also higher (cur­rently 8.50%) than inter­est on PPF (8%).

If you are salaried and have to decide between the two, VPF is bet­ter than PPF.

Visit – http://www.investmentbazar.com

Nithen January 24, 2012 at 5:05 PM

I had started contribution in V.P.F from 2009-2010 and it will be continuous up to 2010-2011. If i want to withdrawl my V.P.F from when I can withdraw it.
Nithen nanaiah

bemoneyaware March 9, 2012 at 11:13 AM

Your article was very helpful. I have referred it in my article
Voluntary Provident Fund, Difference between EPF and PPF

Abhijeet February 19, 2013 at 6:22 PM

Please send me updates

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