EPFO mulls tightening PF withdrawal norms to improve social security cover: Report

The past few years have seen the interest rate on Employees’ Provident Fund (EPF) steadily dip from 8.8 per cent in 2015-16 to 8.55 per cent for 2017-18. But it remained a good way to build a retirement nest egg – tax-free to boot after five years of continuous employment. Besides, a major advantage that it offered compared to other retirement products like PPF and NPS was higher liquidity – a person could withdraw his/her entire corpus if unemployed for over two months.
But, according to The Business Standard, concerned with the high level of PF withdrawals, the Employees’ Provident Fund Organisation (EPFO) is proposing to introduce caps on the amount that can be withdrawn before retirement. The retirement fund body has reportedly proposed that it’s over five crore members be allowed to withdraw only 60 per cent of their total savings or an amount equivalent to three months’ salary – whichever amount is lower – if they are unemployed for one month.
The proposal adds that should a subscriber be unemployed for more than three months, he/she will be eligible to withdraw 80 per cent of his/her PF savings or an amount equivalent to two months’ salary, again the lower of the two. The report claimed that the move is aimed at creating a social security cover for formal sector workers.
Source: Business Today