EPFO: Job uncertainty isn’t a new thing for those in the private sector. Whether it’s due to economic downturns, layoffs, or the hunt for better job opportunities, switching jobs or facing unemployment has become pretty common. When someone loses their job or takes a long break, their main worry is usually their savings. The key part of those savings is their Provident Fund (PF). Many people ask: if they lose their job and their PF account stops getting contributions, will they also stop earning interest on their deposits?
The biggest confusion about PF accounts
There’s a common belief that if you leave your job, no new contributions will go into your PF account. As a result, people think the government will stop paying interest on the funds in that account. This fear often pushes individuals to withdraw their entire PF balance quickly, which can hurt their retirement savings. In today’s tech-driven world, where jobs are changing fast, it can take years to land a new one. During tough times, PF money can be a beacon of hope. But does the interest really stop after three years? The answer is a definite no.
Does interest really stop after 3 years?
Actually, your PF account keeps earning money even after you leave your job. The common myth that “interest will stop if there are no transactions for three years” stems from outdated rules and incomplete information. This rule was meant for retirees, not for young folks or employees who left their jobs mid-career. Even if you lose your job and stay unemployed or unable to find work for the next four to five years, the money in your PF account will keep growing. The EPFO will continue to add interest to your deposits until you hit 58 years old.
Before 2016, there was some ambiguity in the rules, which led to the “3-year” concept. However, the government made a significant amendment to the EPF rules in 2016. This change has clarified the situation. According to the new rules, if an employee leaves their job before the age of 58, their account will no longer be considered “inactive.” Even if no money is deposited into the account for years, the government will continue to credit interest on the account at the annual interest rate announced.