New provident fund law eases contribution limit

New provident fund law eases contribution limit

Employees will soon be able to save up to 15% of their salaries to their provident funds without having to be matched by their employers under the new Provident Funds Act, effective over the next 90 days.

Currently, the law requires an employer to contribute to the fund at a rate not less than that of an employee.

This rule has prevented some workers from saving more to the funds because their employers do not agree to a higher rate.

Under the new law, published in the Royal Gazette late on Tuesday, an employee can contribute to the fund by allowing his employer to deduct it from his salary. His employer will contribute to the fund at a rate specified in the fund's prospectus.

The contributions from the two sides must be between 2% and 15% of the employee's salary.

Furthermore, the amendment empowers a minister to approve a suspension of payments to the funds for up to 12 months in cases of economic crises or emergencies.

As well, the ultimate fall-back investment policy is the safest or lowest-risk investments in a case where an employee has not chosen the type of investment policy they prefer.

In cases where an employer pulls out of a multi-employer provident fund, an employee's membership ends or the fund is dissolved, the employee may transfer his share to another fund of the same purpose or a retirement fund.  

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