CPF
From Indiapensions
The CPF is a provident fund run for employees of the Central Government. The CPF is also applicable to employees of some other organisations. Though it is a provident fund, it is in reality a pay-as-you-go scheme wherein the current contributions are used to finance the current withdrawals. The remaining corpus, if any, is used by the Government.
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Operational framework
Contributions
Contributions by the employee
The subscriber can choose to contribute any thing between 10% and 100% of his emoluments (including the boundary points of this interval) on a monthly basis . Subscribers to the CPF are not required to subscribe to the fund during a period of suspension. If a subscriber was on suspension, then on his reinstatement, he has the option of paying in lumpsum, or in installments, any sum not exceeding the maximum amount of arrears of subscriptions payable for that period. If a subscriber elects to pay arrears of subscription in respect of a period of suspension, the emoluments or portion of emoluments that may be allowed for that period of reinstatement is considered as his emolument. A subscriber on leave with a leave salary equal to or less than half pay or half of the average pay has the option to not subscribe during this period. Such a subscriber, after reinstatement is allowed the option of paying in one lump sum, or in installments, any sum not exceeding the maximum amount of arrears of subscription payable for that period. If a subscriber elects to subscribe during leave, his leave salary has to be considered as his emolument. A subscriber has the option to not subscribe to the fund for the month in which he quits service.
Contribution by the employer
In case of CPF, the employer is also required to make a matching contribution to the CPF account of a subscriber subject to the constraint that the employer's contribution does not exceed 10% of subscriber's emoluments. The employer's contribution has to be made for only those months, in which the subscriber himself is also contributing. In case of an employee who quits the service or dies during a year, contribution shall be credited to his account for the period between the close of the preceding year and the date of the exit. In case of an employee being transferred to another department of the same employer, the liability for employer contribution has to be borne by the parent department. Re-employed pensioners are also permitted to contribute to the CPF. In this case, the employer contribution is calculated with reference to subscriber's net pay.
Interest rate
The employer has to pay an interest to the credit of the account of a subscriber, at rates which are decided by the Government from time to time. The following table shows the rate of interest credited to the CPF in the past years
| Year | Interest rate p.a. |
|---|---|
| 1986-87 to 1999-2000 | 12.00% |
| 2000-01 | 11.00% |
| 2001-02 | 9.50% |
| 2002-03 | 9.00% |
| 2003-04 | 8.00% |
Interest is credited with effect from 31st March of each year depending on the amount in the CPF.
Advances
A subscriber can get an advance from the fund for some specified purposes. These are
- To pay expenses for illness, confinement or disability, cost of higher education.
- To pay obligatory expenses on a scale appropriate to the subscriber's status which by customary usage the subscriber has to incur in connection with social rituals such as marriage.
- To meet the cost of legal proceedings instituted by or against the subscriber, any member of his family or any person dependent upon him.
To get an advance, the employee is required to repay the last advance taken by him. The highest permissible amount is three months pay or half the amount of subscription and interest thereon standing to the credit of the subscriber in the fund, whichever is less. Advances can also be made for purposes other than the specified purposes. This requires sanction from the President. Advances can be made even in the absence of repayment of previous advances, if sanctioned. In this case, the balance of any previous advance not recovered has to be added to the advance so sanctioned. Advances in excess of the limit can also be made by a subscriber, if sanctioned. In case an advance is sanctioned in excess of the limit (the limit of an advance is three months pay or half the amount of subscription and interest thereon standing to the credit of the subscriber in the fund, which ever is less), the advance should not exceed the amount of subscription and interest thereon standing to the credit of the subscriber in the fund.
Recovery of advances
No interest is charged in the recovery of advances. There are certain rules for the number of installments permissible in the repayment of the advances. They are
- The number of installments should not be less than twelve unless the subscriber so elects and not more than twenty-four.
- If the amount of advance exceeds three months pay of the subscriber, the number of installments can be more than twenty-four but not more than thirty six.
- If an advance is sanctioned, without the complete repayment of last advance, the balance of any previous advance not recovered has to be added to the advance so sanctioned and the installment for recovery has to be fixed with reference to the consolidated amount.
Withdrawals
Withdrawals can be sanctioned to a subscriber from the amount standing to his credit in the fund. The prescribed limit is one-half of the subscription and interest thereon standing to the credit of the subscriber in the fund or six months pay, whichever is less. However, the limit is relaxable in certain cases. The CPF has certain rules for the type and amount of withdrawal that is allowed.
Conversion of advances to withdrawals
In case of a subscriber who has already drawn or may draw in future an advance for any of the purposes specified as rule (1) in case of CPF withdrawals, the advance can be converted into withdrawal. This applies to more than one advances. The amount of advance that can be converted into a withdrawal is the minimum of half of the balance in the member's account at the time of conversion and the salary for six months. The balance for this purpose, is calculated as the sum of the accumulation in his account at the time of conversion and the outstanding balance against the advance.
Deposit linked insurance scheme
On the death of a subscriber (this applies to suicide also), the person entitled to receive the amount standing to the credit of the subscriber has to be paid an additional amount equal to the average balance in the account during the three years immediately preceeding the death of such a subscriber. This is subject to the following conditions:
- The balance at the credit of such subscriber, at any time during three years preceding the month of death, should not have fallen below the prescribed limit.
- The additional amount payable under this scheme should not exceed thirty thousand rupees.
- The subscriber has put in at least five years service at the time of his death.
