2016 · Q24
What are the disadvantages of Provident fund Scheme?
- 1Money is inadequate for risks occurring early in working life.
- 2Inflation erodes the real value of savings.
- 3It generates forced saving that can be used to finance national development plans.
Select the correct answer using the codes given below:
Social Security in IndiaEPF & MP Act, 1952
- A1 and 2 only
- B1 and 3 only
- C2 and 3 only
- D1, 2 and 3
Explanation
A provident fund pays out only at retirement, so it is inadequate for risks striking early in working life (1 is a disadvantage), and being a fixed nominal accumulation, inflation erodes its real value (2 is a disadvantage). Statement 3 — that forced savings finance national development plans — is an advantage of the scheme, not a drawback. Hence 1 and 2 only — option (A).