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    Pension Plan VS Provident Fund: Which is Better?

    Last Updated On 23-10-2018

    You can’t rely only on Provident Fund for retirement. Here’s why.

    When you’re in the prime of life, you don’t think about retirement because it is so far in the future. But eventually you must start planning for it and most importantly, you must figure out how you can remain financially independent in your twilight years. In a survey conducted by Towers Watson, 78% of employees are aware that they are not saving enough for a comfortable retirement.

    Yet, there are many who brush aside this concern thinking that their provident fund will take care of them in future. This is where they go wrong.

    Public Provident Fund (PPF) or Employee Provident Fund (EPF) is a great savings instrument but it is not sufficient as a pension plan. Here’s why:

    • Rate of interest vs Rate of inflation - With inflation rising constantly, it seems unlikely that the rate of interest offered on provident fund will be able to match up. This means that although your money has been accruing in your PF account, it is still not enough to meet your needs in future.
    • Early EPF withdrawal - Not many employees stay with the same employer all their lives. When they switch jobs, most tend to withdraw their Employee Provident Fund (EPF) for various reasons such as going on a holiday or purchasing luxury goods. By doing this, they are putting their own pension plans at risk.
    • Tax savings - Many people tend to use PF to save tax. This means that they don’t really focus on it as a retirement tool and will not save adequately as a result. Moreover, with rising inflation, there is no way that PF alone can meet your needs in future.
    • No liquidity - PF is a long-term plan and does not offer liquidity that most people need during emergencies. 

    Provident fund is a great savings plan but it falls short of being a pension plan for these reasons, as well as the fact that most people use it only to save tax. So, what should you do? Look at the different types of pension plans out there and which one is the most suitable for you. There are a host of pension plans to choose from such as one-time premium pension plan and these could be your lifesaver in the days to come.

    Still not convinced that you need a pension plan apart from PF? Read on to know about the benefits of pension plans and how they will safeguard your future. 

    1. Freedom - Financial freedom is something that we take for granted when we are young and earning money.  Little do we realize that during our retirement years, we will remember those years when each pay check arrived every month on time. No matter how old you grow, expenses will not go down and in fact, will only go up. So, a well thought out pension plan eliminates this worry and helps you live your life with your head held high.
    2. Medical Emergencies - As we grow older, we are more prone to falling sick and there are high chances of medical emergencies. A pension plan will help you out in this case when you will suddenly need extra funds.
    3. Live your life - All the years you worked, you were focused on earning money so that one day when you retire, you will be able to live the life you wanted. A retirement plan is flexible and allows you to make your dreams come true. 

    Saving in a provident fund is crucial for your investment portfolio, but having a provident fund as the only savings instrument is not recommended. You will need an additional pension plan to have a stress-free retirement. 

    To know more about term plan & term insurance, visit PNB MetLife website.


    The aforesaid article presents the view or an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ before making any decision.

    PNB MetLife India Insurance Company Limited, Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka.
    IRDAI Registration Number 117. CI No: U66010KA2001PLC028883. For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding the sale.
    The marks “PNB” and “MetLife” are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
    Call us Toll-free at 1-800-425-6969.. Phone: 080-66006969, Website:, Email: or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203

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    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

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