Transferring your PPF account from one post office to another? This is how you do it

Another government-backed saving scheme like the Post Office Saving scheme, the National Saving scheme, the Senior Citizen Saving scheme and so on, is the Public Provident Fund (PPF). Rather than hoard your money at home or park it in a savings account for a lower interest rate, choosing to invest your savings in PPF is a wise option. This low-risk savings scheme is beneficial as a subscriber can invest between Rs.500 to Rs.1,50,000 annually at a healthy interest rate of 8.70% per annum. A PPF account can be opened in either a post office or a bank – as per your convenience.

PPF Account Transfer

Due to certain situations – either you’re shifting your house, change of location (city or area) because of a job change or so on, you would need to shift your PPF account from one post office or bank to another, or bank to a post office or vice versa. The shift will require you to open a new account in the post office or bank, but that doesn’t mean that you will lose your previous savings. In fact, a new account with your outstanding balance will be opened. And no, you will not lose any interest in the process, neither will there be a processing fee for the transfer. Let’s get into the process of transferring a PPF account from one post office to another:

  • The first step for the PPF account holder is to fill in the Form SB 10(b) – an application form for the transfer of the PPF account from one post office to another. The form is either available at the post office or you can download a copy from the India Post website.
  • The application form consists of the account holder’s account number, his/her PF balance and the new address of the post office that he/she is shifting the account to. The form will require three specimen signatures.
  • The account holder has to then submit his/her passbook along with the Form SB 10(b) to his/her current post office. One must make sure that the PPF passbook is updated before submission. To be on the safe side, take a photocopy of your updated PPF passbook.
  • After submission, the postmaster will cross check the passbook balance, verify that the form is in order and sign it to confirm the closure of the account.
  • The postmaster will then hand back the original PPF passbook and an application with a demand draft or cheque of the outstanding amount, which will be sent to the new post office.
  • As soon as the new post office receives the application and the demand draft, a new account will be opened in its books. A new passbook stating the outstanding amount will be issued to the account holder.

The entire process should take 2-3 weeks. On opening the new account, make sure the balance stated in the issued passbook is correct. Else, contact the post office immediately to rectify the mistake. Also, as mentioned before, the interest rate does not change when he/she transfers their account to another post office. There have been cases of this happening and it is just a product of negligence. If you find yourself in this situation, make sure this too is rectified at the post office immediately.

EPFO to Invest More in Equity

EPF (Employees’ Provident Fund) is considered to be a secure post-retirement fund for taxpayers. With the capital market expected to incorporate a policy rate cut, interest rates are expected to fall, bringing about a steep drop in EPF. Therefore, it is highly unlikely that the EPF will be able to maintain the previous year’s rate of interest. Among finance professionals, financial advisers, mutual fund managers, and investment analysts, 84% of them are expecting that the EPF rate may be lower this year. The EPFO started investing in equity ETF (Exchange Traded Funds) from last year in order to improve returns, however the allocation were too minor to bring about a substantial change to the overall returns.

Epf Balance

Government’s view:

The Government feels otherwise as investment in equity is expected to deliver positive results in the long run. The most important thing when investing in equity is to give it time to deliver results. Financial experts are backing this view as globally, around 30% of retirement savings are being invested in equity. Another important thing to remember is that out of Rs.9,500 crore EPF inflow every month, only about Rs.475 crore is invested into equity.

Problem of evaluation

Amid the debate of how much to be investment in equities, there are bigger issues arising. According to financial experts, there is a huge flaw in the way EPFO is valuing the equity investments.  Till the time the investment was being made in bonds and deposits, it was fairly simple to value the EPF portfolio. The calculation was based on the face value of the bonds and the interest was then credited to the PF accounts of members.

Returns from NPS:

While EPF is unsure of its returns and accounting, the NPS (New Pension System) is generating double digit returns for investors. Workers in the government sector have made 11% compounded profit in the past five years, and more than 14% in the last three years.  Investors who have aggressively invested in NPD have gained the most.

EPF to NPS?

There are two ways of looking at whether or not you should shift your retirement fund from EPF to NPS. Experts feel that while market-linked returns, flexibility, and transparency are the positive factors, negative factors are tax on maturity and compulsory annuity. The Government is trying its best to make NPS more lucrative to investors. Last year, it saw an announcement of additional tax benefit on NPS investments, this year the deal was enhanced by making 40% of the NPS corpus tax-free on its maturity. EPF subscribers can easily shift to the NPS, however the employee is given a single chance to return to EPF if he or she desires.

Since August 2015, the EPFO has made an investment of approximately Rs.7,500 crore in equity ETFs and has gone up to Rs.8,500 crore, which makes an absolute return of 12%. However, the CBT (Central Board of Trustees) are strongly opposing the move towards equity investment. The CBT believes it is not a good idea to invest workers’ savings in such risky instruments as they are speculative.