EPFO 3.0 Update: Major update for EPFO susbscribers. Under the suggested EPFO 3.0 framework, employees might soon have the option to withdraw funds from their EPF accounts using ATM cards. While this feature appears to be simple and convenient, it brings up numerous questions, particularly for those employees who are close to retirement. The primary concern is whether withdrawing a significant portion of their EPF balance, for instance, up to 75%, would disrupt their service continuity and influence the pension they receive under EPS.
A clear distinction between EPF and EPS
The regulations on this issue are quite straightforward. ATM withdrawals are only applicable to the EPF corpus, which includes the contributions made by both the employee and the employer. There is also a limit on withdrawals, with a maximum of 75% allowed. Any withdrawals exceeding this limit are not allowed.
Pension funds are distinct and secure
The key point to note is that EPS, or the pension fund, is entirely separate. Funds deposited in this account cannot be accessed through the ATM facility. This is why pension eligibility is determined not by the EPF balance but by the service duration recorded under EPS.
Insights from experts
As per Munab Ali Back, Head of Compliance Advisory at Core Integra, making a partial withdrawal from the Provident Fund does not impact the employee’s service duration, pension fund contributions, or their eligibility to receive a pension.
This information is particularly crucial for employees around the age of 50. Even if a 50-year-old employee withdraws a considerable amount from their EPF, their EPS service record will remain intact. Provided they complete at least 10 years of eligible service, they will keep their pension rights.
What are the guidelines for resigning from a job?
If an employee decides to leave their job, they must wait 36 months to claim their pension scheme contributions. Additionally, withdrawals are permitted upon reaching the age of 55 or in cases of permanent disability. Many individuals are also concerned that if they withdraw nearly all of their EPF funds after leaving their job, it will affect their pension. But the rules are clear here too: EPF and EPS are separate accounts. Withdrawals from one do not affect the other.
When can pension funds be withdrawn?
Pension fund funds cannot generally be withdrawn directly. There are specific conditions for this, such as a break of 36 months or more, permanent disability, or eligibility at age 58. If eligible, the final settlement of the pension fund is transferred to the employee’s account.
What should PF account holders understand?
Overall, withdrawal of EPF money may become easier under EPFO 3.0, but it will not affect the pension rules. This means that if you withdraw your EPF funds within the prescribed limit, your pension is protected. The key to your pension is your length of service under the EPS, not how much you withdraw.
