Employees’ Provident Fund Organization (EPFO) has defended the change in withdrawal rules. He has described the rule of maintaining minimum 25 percent balance in EPF account as a balanced and wise decision. It has said that this has been taken keeping in mind the long term and retirement funds of EPFO subscribers.
Decision taken in the interest of subscribers
Central Provident Fund Commissioner and EPFO CEO Ramesh Krishnamurthy said that this rule has been taken to make it easier for subscribers to access the money deposited in EPF and to prevent them from withdrawing their entire savings before retirement. Speaking to CNBC-TV18, he said, “The purpose of this change is to give people an opportunity to use the money deposited in PF when needed. An effort has also been made to preserve the fund for social security in the long term.”
CBT had approved the new rules on October 13.
Under the proposals approved by the Central Board of Trustees of EPFO on October 13, subscribers can withdraw 75 percent of the money deposited in the EPF account for essential needs, housing needs and in special situations. 25 percent of the money will have to be maintained in the account as minimum retirement buffer. 8.25 percent interest is available annually on this.
Impact of frequent withdrawal of money on social security
Krishnamurthy said that frequent withdrawal of money affects the social security of the subscribers. According to EPFO data, about half of the members have less than Rs 20,000 left on the final settlement. 75 percent of pension contribution is withdrawn within three years. The special concern of the employees is about the rule which states that the employee will be able to withdraw the money deposited in EPF only after 12 months of leaving the job.
Employees may face problems due to sudden job loss
Experts say that due to this rule, employees will have to face problems in case of sudden job loss. Especially considering the retrenchment of employees in certain sectors including IT, this rule can create a lot of problems. However, EPFO is not ready to accept this argument. He says that after completion of one year, it is allowed to withdraw some money deposited in EPF. Subscribers can withdraw this money for treatment, education, marriage or special circumstances.
Some employees withdraw the entire amount upon leaving the job.
Krishnamurthy said, “The 12 month rule is actually for pension eligibility, because many members withdraw the entire money deposited in the PF after some time. If a person remains unemployed for 12 months, he can also withdraw 25 percent of the money reserved in the account.” Suchita Dutta, Executive Director of the Indian Staffing Federation, said that this rule is good from the point of view of discipline but it will cause problems to the people who lost their jobs due to retrenchment.