All means serve the ultimate goal: Retirement Savings.

If you are still unfamiliar with the concept: A Provident Fund for contributions is a pension savings vehicle designed for both employees and self-employed individuals.

Savings in Provident Funds are based on the continuous accumulation of a portion of the member’s monthly income toward retirement. Upon retirement, the accumulated funds may be received as a fixed monthly annuity that replaces salary income, or as a lump-sum payment, depending on the type of fund and the applicable regulatory framework.

How does it work?

A Provident Fund operates on the principle of allocating a portion of monthly income to long-term retirement savings. The accumulated funds are managed by a licensed fund management company supervised by the Ministry of Finance. Accordingly, the savings may generate returns through capital market investments. Investment gains are tax-deferred, subject to regulatory provisions. Investment gains are tax-exempt.

At the end of the savings term (retirement age), the accumulated balance plus investment returns, net of management fees, is paid to the member as a monthly pension benefit. The law defines the rules and timelines for contributions, their rates, and the conditions for withdrawals. Under certain legal conditions, withdrawals may also be permitted as a lump sum.

As a member, you may choose any available investment track of the provident fund according to your personal financial considerations. You may also switch between investment tracks freely and at any time, without cost and without affecting your accrued rights. Naturally, any such decision should be made prudently and after a comprehensive evaluation of the available options.

A salaried member benefits from employer contributions, and all members benefit from tax incentives.

Since 2008, mandatory pension legislation requires every employer to provide pension savings for employees. The employee may choose the pension savings vehicle (for example, a Provident Fund) and the managing institution, while the employer is required to deposit the statutory contributions on a monthly basis.

Where a salaried employee selects a provident fund, the employer makes monthly deposits that include both the employer’s share and the employee’s share deducted from salary. The employer also contributes to the severance component.

A self-employed member benefits from tax incentives.

A self-employed individual who contributes to pension savings plans is eligible for tax benefits granted by the state, typically calculated at year-end.
Contributions are assessed on an annual basis (January 01 until December 31) according to eligible income and may be made either as a lump sum for the full year or as regular monthly deposits. These tax benefits apply to various pension savings vehicles, including Provident Funds. To fully utilize the available tax benefits, contributions should be made up to the maximum limits in accordance with income.

Provident Funds are considered an efficient and advantageous instrument for long-term retirement savings accumulation. However, the decision regarding which fund to select, and whether and how to switch between investment tracks, should be made on an informed and professional basis. We are here to assist you.