The Employees’ Provident Fund Organisation (EPFO) has enacted a major change in the rules governing the EPF. Employees will now be permitted to withdraw 75% of their EPF balance within one month of being unemployed. They can withdraw the balance 25% after two months of being unemployed. Earlier employees had to be unemployed for at least two months to withdraw their EPF balances. They could withdraw their entire EPF balance after this period and close the account.
Employees are not obligated to withdraw their balances and close their account during spells of unemployment. They can let the account lie dormant and it will continue to earn the interest that is declared each year by the EPFO.
If employees take up a new job, they can migrate their EPF account to the new employer. However, this is not possible if the new employer is not part of the EPF system as a result of small size or being in the unorganised sector. Self-employment also does not count and such individuals cannot make fresh contributions to the EPF. For such persons, the National Pension System (NPS) offers a good alternative. You can read about the NPS, here.
Employees who have spent at least 10 years in service and have attained the age of 58 years (50 years for early pension) become eligible for the EPS or Employees Pension Scheme. This service can be with a single employer or cumulative service with multiple employers. You can establish this cumulative service by taking a ‘scheme certificate’ once you move jobs. However once again, only organised sector employers within the EPF ambit count. Self-employment or unorganised sector employment does not count. The EPS pension is determined by a complex formula linked to final salary and number of years in employment. A recent Supreme Court judgement could lead to a sharp hike in the EPS pension.
ETF Manager Extension
The EPFO also extended the terms of the SBI and UTI as ETF (Exchange Traded Fund) managers for the EPF scheme. The EPFO currently invests 15% of its incremental corpus (fresh inflows) into equities through ETFs which track indices like the Nifty and Sensex.