Nearly half of EPF members retire with Rs 10,000-20,000 in PF: EPFO | Finance News

The mandatory minimum balance of 25 per cent of the total accumulated funds introduced under the Employees’ Provident Fund (EPF) Scheme, 2026, was prompted by low retirement savings among members, with nearly half of subscribers left with only ₹10,000-20,000 in their provident fund accounts at the time of final settlement, the Employees’ Provident Fund Organisation (EPFO) said.

“The need for maintaining a minimum balance in the account of the member was felt because it was observed that about 48.7 per cent of EPF members have PF balances of only between ₹10,000 and ₹20,000 at the time of final settlement. However, an employee earning ₹15,000 per month can accumulate up to ₹14 lakh over a 20-year period, of which the minimum balance of nearly ₹3.5 lakh would remain even if 75 per cent was withdrawn. Therefore, this measure alone is expected to ensure a retirement corpus that is seven to 35 times higher for nearly 50 per cent of the members,” the EPFO said in response to an email query from Business Standard.

The minimum balance is one of several changes introduced under the EPF Scheme, 2026, which came into force on July 1 and seeks to simplify withdrawals, improve member services and modernise the EPFO’s compliance framework.

The new scheme replaces multiple purpose-specific withdrawal provisions with a common framework and allows members to access provident fund savings after completing 12 months of service for categories such as illness, education, marriage and housing. It also introduces a mandatory minimum balance that members must retain after partial withdrawals.

The EPFO said the measure could substantially improve retirement outcomes, with nearly half its members expected to see an increase of up to 35 times in their old-age savings.

Unlike the 1952 scheme, which allowed partial withdrawals for specified purposes subject to prescribed conditions but did not require members to retain any minimum retirement corpus, the EPF Scheme, 2026 mandates that a protected balance remain in members’ accounts even after withdrawals.

Mousami Nagarsenkar, partner at Deloitte India, said the revised framework appeared to strike a balance between improving access to provident fund savings for genuine financial needs and preserving the long-term retirement objective of the EPF.

“The simplified partial withdrawal framework appears largely employee-friendly, providing members with easier and more streamlined access to provident fund savings to meet genuine financial needs. The rationalisation of numerous withdrawal provisions into three overarching categories — essential needs, housing needs, and special circumstances — simplifies the framework and reduces the administrative complexity that existed under the earlier scheme,” Nagarsenkar said.

However, Debjani Aich, partner at CMS INDUSLAW, cautioned that while the framework seeks to protect retirement savings, it could also reduce liquidity for workers who remain unemployed for extended periods.

“Under the new provisions, an employee can withdraw the permissible PF balance of 75 per cent after one month of unemployment, with the remaining 25 per cent retained until 12 months of continued unemployment. Similarly, pension withdrawal for employees with less than 10 years of service has been extended from two months to 36 months. These provisions may create liquidity concerns for an employee after cessation of employment,” Aich said.