The federal government has reduced the rate of profit on the amounts deposited in the General Provident Fund (GPF) of government employees and on the credit balances of subscribers.
According to a notification issued by the federal government, the annual rate of profit on the General Provident Fund for the financial year 2025-26 has been fixed at 12.05 per cent, whereas previously, during the financial year 2024-25, the rate was 12.46 per cent.
Thus, for the new financial year, the rate of profit on the GPF has been reduced by 0.41 percentage points.
According to the notification, the new annual profit rate of 12.05 per cent will apply to the amounts deposited in the General Provident Fund and the credit balances of subscribers for the financial year 2025-26.
This rate will apply to the GPF accounts of the relevant government employees of the federal government, under which annual profit on the employees’ deposited amount will be calculated according to the prescribed rate.
The notification issued by the federal government also mentions various provident funds administered by the Ministry of Railways and the Ministry of Defence.
According to the announcement, the Ministry of Railways and the Ministry of Defence will separately issue the necessary instructions regarding the rate of profit for the financial year 2025-26 on the balances of the provident funds administered by these ministries.
The General Provident Fund is a compulsory savings system for federal government employees. Under this system, a specified amount is regularly deducted from employees’ salaries and deposited into their GPF accounts.
This amount continues to accumulate during the employee’s service, and annual profit is also paid on it according to the rate prescribed by the government.
Upon retirement or in other relevant circumstances under the rules, the employee is paid the amount accumulated in their GPF along with profit according to the rules.
Impact of the reduction in the profit rate on employees
For government employees who have a large amount deposited in their GPF, a reduction in the profit rate means that they will receive relatively less annual profit on their accumulated balance compared with the previous financial year.
For example, if a large amount is present in an employee’s GPF account, under the new rate, annual profit on that amount will be calculated at 12.05 per cent compared with the previous year’s rate of 12.46 per cent.
The actual financial difference will vary according to the size of the balance in each employee’s account.
The federal government’s new rate has been fixed for the financial year 2025-26, so profit in the GPF accounts of the relevant employees will be calculated according to this rate.
Thus, for federal government employees depositing money into the GPF, the slight reduction in the profit rate is an important financial change, which will affect their annual savings.