NEWS

• The Employees’ Provident Fund Organisation (EPFO) is moving to liberalise withdrawals while introducing a 25% minimum balance requirement.
• EPFO data reveals that nearly half of its members have less than Rs 20,000 at final settlement, raising concerns about financial preparedness for retirement.

HIGHLIGHTS

Premature Withdrawals:

• High frequency of withdrawals during employment depletes EPF balances.
• Around 95% of final settlements are premature, triggered immediately after unemployment.
• Nearly 46% of these members rejoin the workforce, restarting contributions.

Low-Income Workforce:

• Over 65% of EPFO members earn ≤ Rs 15,000/month, contributing mandatorily.
• Only 35% contribute voluntarily for higher wages, reflecting vulnerability of low-income formal workers.

Impact on Pension:

• Premature withdrawals reduce eligibility for family pension and lower EPS benefits.
• Minimum 10 years of pensionable service is required under Employees’ Pension Scheme (1995) to claim full benefits.

Recent EPFO Reforms

Withdrawal Rationalisation:

• Categories reduced from 13 to 3 main types:
  1. Essential needs (illness, education, marriage)
  2. Housing
  3. Special circumstances

Flexible Limits:

• Education withdrawals: now 10 times during membership
• Marriage withdrawals: 5 times
• Illness & special circumstances: 3 and 2 times per financial year

Minimum Balance Rule:

• 25% of EPF balance must remain in the account; the rest can be withdrawn.
• 75% withdrawal allowed immediately after leaving a job; 100% after one year of unemployment.