For many salaried employees, the Employees’ Provident Fund (EPF) forms the core of their retirement savings. But many investors go a step further and put extra money into the Voluntary Provident Fund (VPF) for its stable returns, tax benefits and safety.
Now that the EPFO board has kept the EPF interest rate unchanged at 8.25% for FY26, many investors are wondering whether they should continue increasing their VPF contributions or divert extra savings to market-linked investments such as SIPs that may offer higher long-term growth.
According to Pratik Vaidya, Managing Director and Chief Vision Officer at Karma Management Global Consulting Solutions Pvt. Ltd, the decision should largely depend on an investor’s risk appetite and overall financial planning.
WHY VPF REMAINS APPEALING
“VPF holds a strong value at 8.25% for salaried investors who want long-term savings with stability,” says Pratik Vaidya. He points out that while savings accounts offer about 3% and bank fixed deposits hover around 6–7%, EPF and VPF continue to offer a meaningful premium.
What makes VPF particularly attractive is that it earns the same interest as EPF while remaining part of a disciplined retirement savings plan. “For most professionals, especially those in their mid-career stage, VPF is a simple way to add to one’s retirement corpus without taking any market risks,” Vaidya adds.
In today’s unpredictable investment environment, the stability of EPF-backed savings is highly attractive to conservative investors.
STABILITY ENCOURAGES MORE CONTRIBUTIONS
Even though the EPF interest rate hasn’t changed, this unchanging rate reinforces confidence among investors. Vaidya explains, “Over the past several years, many investment options have seen frequent changes in interest rates or market volatility. By comparison, the EPF framework has not changed dramatically.”
He says that for salaried employees using VPF for retirement planning, stability often matters more than short-term variations in returns. “A stable rate of 8.25% gives employees a robust baseline to decide how much surplus savings to allocate to their VPF,” Vaidya says.
For those who already invest in equities via SIPs or mutual funds, VPF acts as the stable debt arm of the portfolio. Rather than cutting back, the steady interest rate could actually encourage more contributions, especially among risk-averse investors.
SHOULD EXTRA VPF CONTRIBUTIONS BE MOVED TO SIPs?
Vaidya advises careful planning here: “This decision should ideally be made considering your entire financial plan, not just the EPF interest rate. Equity funds and SIPs serve a different purpose than VPF.”
Market-linked funds can deliver superior long-term growth but come with risk and volatility. VPF, in contrast, is a predictable long-term growth vehicle. “Pulling current VPF balances just to chase higher returns is not advisable, as it removes a constant in your retirement portfolio,” he warns.
For younger investors comfortable with market risk, additional savings can be directed into equities. But the best approach, according to Vaidya, is a balance: equity for growth and VPF for comfort.
VPF: A SAFE AND TAX-EFFICIENT CHOICE
Despite the increasing popularity of market-linked retirement products, VPF remains one of the safest and most tax-efficient options available to salaried employees.
Since VPF contributions are part of the EPF system, they operate within a well-regulated framework. The interest earned remains tax-efficient within specified limits, and withdrawals after retirement are tax-free if conditions are met.
“VPF remains a predictable, disciplined, and low-risk way to build long-term wealth. It continues to be an asset of choice for those looking to secure retirement without unnecessary market risks,” Vaidya concludes.
In simple terms, for salaried investors, SIPs may offer long-term growth, but VPF provides stability. A balanced combination of the two, based on one’s risk appetite, can be a sensible way to build a strong retirement fund.
