To mark the 114th national day celebrations, the National Pension and Provident Fund (NPPF) will introduce a provident fund (PF) scheme for workers in the private sector.
So far, it offers the service only to civil servants, state-owned organizations, and armed forces.
The scheme begins today.
Under this new scheme, a member is required to contribute a minimum of 5 percent of the basic pay and matching contribution by the employer, if any or 10 percent of the total income of a period if one is self-employed.
NPPF Chief Executive Officer (CEO) Dungtu Drukpa said that they were creating a level playing field to private sectors since there are only two institutions that provide PF services to private sectors.
“This scheme would help cover the employees of the private sectors and increase coverage under the defined contribution scheme,” the CEO said.
However, he said that it would depend on individuals to choose the institutions for the PF.
Dungtu Drukpa said that the PF scheme was extended to any private individual who are self-employed including farmers and not necessarily working under someone.
The CEO said that the primary objective of the scheme is to provide post-retirement benefits to members, income support in the event of loss of employment due to permanent disability, and income support to a family in event of the demise of the member.
He said that whatever the facilities the other two institutions offering PF services provide, NPPF would also work out and offer the same services in the future.
He said that extending the PF to private sectors will also help in financial inclusion since most of them do not have savings accounts in which they will earn interest.
He said that it has flexibility and portability. If a member is switching jobs from one agency to another agencies they can continue the PF with the same account.
When a member retires from service the person will be provided with a lump sum benefit which will be a total accumulation of the individual member contribution, employer contribution if any and the interests earned on member and employer contribution.
The NPPF will be exempted from all taxes and assessments on income derived from contributions and investments.
If employees are on leave without pay, no deduction will be made for the period during which employees are on leave.
Over the period of the last ten years, NPPF has been providing an average annual return of 8 percent and for last year the 7.96 percent rate of return was provided.
Currently, there are 65,890 public servants as active members of NPPF and 8,294 pensioners and beneficiaries. NPPF is 21 years in service.
Meanwhile, the ministry of labour has been also emphasising initiating PF in private sectors.