What are the disadvantages of Provident Fund Scheme 1 Money is inadequate for risks occurring early ...........

Social Security Pension and Insurance

What are the disadvantages of Provident Fund Scheme?

1. Money is inadequate for risks occurring early in working life.

2. Inflation erodes the real value of savings.

3. It generates forced saving that can be used to finance national development plans.

Select the correct answer using the codes given below:

This questions was previously asked in

EPFO APFC (2015)

1 and 2 only

1 and 3 only

2 and 3 only

1, 2 and 3

- Statement 1: Money is inadequate for risks occurring early in working life.

- True. Provident Funds are designed for long-term savings, not immediate risks.

- Statement 2: Inflation erodes the real value of savings.

- True. Inflation can diminish the purchasing power of money saved in a Provident Fund.

- Statement 3: It generates forced saving that can be used to finance national development plans.

- This is generally considered a benefit rather than a disadvantage, as it aids national development.

The correct option is Option 1: 1 and 2 only.

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