The Employees’ Provident Fund Organization (EPFO) has updated the rules for premature final settlement of provident fund (PF) and pension accounts.
The new rules are stricter than before. Now, EPFO subscribers can apply for final settlement only 12 months after leaving their job, instead of the previous two-month window.
Similarly, pension withdrawals will be allowed after 36 months of unemployment.
Current Withdrawal Rules
If a member is unemployed for at least one month, they can withdraw up to 75% of their EPF balance.
Under Section 69(2) of the EPF scheme, if a member remains unemployed for two consecutive months, they could previously withdraw their entire EPF balance.
Union Minister Mansukh Mandaviya clarified that in case of job loss:
Up to 75% of the PF balance can be withdrawn immediately.
The remaining 25% minimum balance can be withdrawn one year after job loss.
This change is meant to simplify partial withdrawals while ensuring post-retirement security.
Importance of Maintaining a Minimum Balance
Members are required to maintain at least 25% of their PF balance, except in special cases.
This ensures they continue to earn high interest (8.25% per year) and benefit from compounding.
Additional Advantage
Earlier, members had to provide reasons such as unemployment, natural disaster, or company closure to withdraw funds partially.
Now, no reasons or documents are required, making partial withdrawals much easier.
Why These Changes Were Needed
Previously, withdrawing the entire PF and pension after two months of unemployment caused problems when members joined a new job:
Pension requires minimum 10 years of service.
If the full PF was withdrawn, the previous employment period was not counted, and members had to start over for pension eligibility.
Now, members must remain unemployed for 12 months before being allowed to withdraw the entire PF, preserving the continuity of pension benefits.
New Rules for Pension Withdrawal
During a meeting of the EPFO’s Central Board of Trustees, Labor Minister Mansukh Mandaviya announced:
Pension withdrawals will now be allowed after 36 months, instead of 2 months.
This ensures members meet financial needs while maintaining retirement security.
