Key Difference Between EOBI Pension Funds & Provident Funds?
EOBI Pension Funds Vs Provident Funds?
EOBI pension funds & provident funds are two types of retirement financial plans used and differ from area to area. However, the EOBI pension plan works in Pakistan overall. EOBI pension is provided by employers and the government to workers for a better life after retirement.
The provident fund’s program is only used in Asia and Mexico and generally, it is known as social security in the USA country. The following are the key differences between these EOBI pension funds & provident fund plans.
EOBI Pension Funds
EOBI pension plan is a retirement financial program that is contributed by employers of private organizations and employees of organizations. After the contributions process these funds are collected in a funds pool for workers’ future benefits.
In this fund, employers pay 5% of the contribution but the employee Pays the 1% funds for its contribution. EOBI pension funds are used for the worker’s child’s education, and marriage, after death his widow can claim the pension. EOBI Pension withdrawal is taxable.
Provident Funds
Provident funds are retirement plans that are operated by the government. It is mostly funded by taxes, employers, and employee contributions. The government made some rules and regulations about the withdrawal of these funds. If a participant dies his widow, children, and dependents may be able to withdraw these funds on his behalf.
In the case of provident funds, a participant can get one-third (⅓) or one-fourth (1/4) before his retirement. The remaining funds can be distributed in monthly payments. But when a participant withdrew a specific amount of payment he must pay tax. This tax treatment is different in different regions. However, only a portion of provident funds lump sum withdrawal is tax-free for all participants.
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