The Employees’ Provident Fund Organisation (EPFO) was created to ensure that India’s workforce has financial security after retirement. However, recent data shows a worrying trend: many workers are withdrawing their EPF savings before retirement, leaving them with very little for old age.
To address this, EPFO has introduced new rules, including a 25% minimum balance requirement, aiming to preserve long-term savings. Here’s what every aspirant needs to know.
Minimal Savings at Retirement
EPFO data shows that the final settlement amounts for most members are surprisingly low:
- 50% of members have less than ₹20,000 at retirement.
- 75% have less than ₹50,000.
- 87% have less than ₹1 lakh.
For workers in India, where social security is limited, this is a serious concern.
Why Savings Are Being Drained: Premature Withdrawals
The main reason for low EPF balances is premature final settlements.
- In 2024-25, 95% of 52.95 lakh final settlement claims were premature withdrawals, often following short-term unemployment.
- Many members treat EPF as a temporary cash source rather than a retirement fund.
- 46% of those who withdraw prematurely rejoin companies soon after, starting the cycle again.
This constant exit and re-entry breaks continuity and reduces long-term benefits.
Low-Income Members Dominate EPFO
EPFO has over 30 crore accounts, with a corpus exceeding ₹26 lakh crore. But:
- 65% of members earn ₹15,000 or less per month, making EPF their only long-term saving.
- Only 35% contribute voluntarily beyond ₹15,000.
For low-income workers, financial vulnerability forces frequent withdrawals, further reducing retirement savings.
The Rise of Partial Withdrawals
Partial withdrawals have increased, especially after COVID-19.
| Type | Claims (2024-25) | Amount (₹ Crore) | Change |
|---|---|---|---|
| Illness | 3.25 crore | ₹52,634 | +55% vs 2023-24 |
| Housing | 15.52 lakh | ₹23,712 | Steady rise |
| Special Circumstances | 6.99 lakh | ₹1,017 | Highest in 7 years |
Some members withdraw illness advances multiple times, with 25% withdrawing four times between 2017–2025.
Long-Term Impact on Pension
Premature withdrawals harm pension eligibility and reduce the future retirement corpus:
- Pension Ineligibility – Breaks in service can disqualify members from family pension.
- Lower Pension – Early withdrawals reduce Employees’ Pension Scheme (EPS) benefits.
- Service Requirement – A minimum of 10 years of service is needed under EPS for pension.
Repeated withdrawals mean workers may retire without adequate income.
EPFO’s New Rules
To protect savings, EPFO introduced key changes:
- Withdrawal categories reduced from 13 to 3:
- Essential Needs (illness, education, marriage)
- Housing Needs
- Special Circumstances
- Mandatory 25% minimum balance – 75% of the corpus is still accessible immediately after leaving a job.
- Flexible partial withdrawals – Education (10 times), Marriage (5 times), Illness (3 times), Special Circumstances (2 times per year).
Clarification from Ministry of Labour
- 75% of EPF can be withdrawn immediately after leaving a job.
- 100% withdrawal is allowed after one year of unemployment.
The goal is to ensure workers do not retire with negligible savings.
Key Takeaways for Aspirants
- Frequent withdrawals shrink your retirement corpus.
- Partial withdrawals for illness, housing, and emergencies are available but must be used wisely.
- EPFO now requires a minimum 25% balance, securing at least some savings for old age.
- Long-term service is critical for pension benefits under EPS.
Understanding EPFO rules and retirement planning is crucial to financial security in old age.
Source: The Indian Express