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The Employees’ Provident Fund Organisation (EPFO) has increased the time period for availing premature final settlement during unemployment from the existing two months to 12 months. The minimum time period for final pension withdrawal has been increased from two months
to 36 months.
These changes — along with a relaxation in withdrawal norms for education, illness, housing and special circumstances — are expected to come into effect in the next 1-2 months, a goverment official said on Tuesday.
The changes in the minimum period for premature final settlement, only affect 25 per cent of the PF contribution — minimum balance requirement — while 75 per cent can be withdrawn at all times.
The move is aimed at boosting existing pension corpus levels that tend to get depleted due to complete withdrawals only after two months of unemployment.
About 50 per cent of EPF members have less than Rs 20,000 at the time of final settlement, and 75 per cent of pension withdrawals happen within 4 years, the official said.
“We have observed that the same person, after 2 months (of unemployment) and after withdrawing the entire PF amount, is again rejoining another company.
Effectively, the members are doing a disservice to themselves by withdrawing the entire amount and also not being eligible for a pension,” said the official. “Due to periodic withdrawals of pension funds, members were unable to build a sufficient corpus.
Therefore, the 2 months have been extended to 12 months for PF withdrawals in case of unemployment, for the 25 per cent lock in amount,” the official added.
The clarification comes after the EPFO introduced significant changes in the withdrawal conditions for over 30 crore members on Monday. Withdrawals for education have been allowed up to 10 times, and for marriage up to 5 times, compared with the existing limit of 3 partial withdrawals combined.
EPF members can also withdraw funds without specifying any reason under a ‘special circumstances’ category. There has been a reduction in the minimum service period required for withdrawals to 12 months (from 5 years) for housing, 7 years for education and marriage, and any time during service for other withdrawals.
