New PF withdrawal rules draw backlash:From lower retirement corpus to unavailability of funds to withdraw during unemployment, experts decode all the concerns

After the government introduced changes to the rules governing how Employees’ Provident Fund (EPF) subscribers can withdraw money from their PF accounts, netizens have expressed significant backlash on social media platforms. Out of several changes made, one amendment is that, earlier, the PF subscriber was allowed to withdraw money after being in two years of continuous employment, but now, he will be only allowed to pullout his PF balance only when he has sat unemployed for last 12 months straight. This 12-month rule has drawn netizens’ ire. An ‘X’ user termed the new changes as “bureaucratic cruelty against employees.” While, another user wrote that with frequent layoffs and fewer jobs in market, this was how the government would support its taxpayers. All India Trinamool Congress (TMC), Member of Parliament (MP), Saket Gokhale, said, “The new EPFO rules introduced by the Modi Govt are SHOCKING AND RIDICULOUS. It is open THEFT of salaried people’s own money.” The recent decision by the EPFO to extend the withdrawal period for Provident Fund (PF) to 12 months of continuous unemployment, up from the earlier two months, has sparked debate. The move raises concerns about how unemployed individuals will manage day-to-day expenses without access to their own savings during this period. The policy could lead to increased financial strain, especially for those without alternative income sources. – Abhishek Bhilwaria, CEO at Bhilwaria MF Depending on the response of employee unions EPFO might roll back this proposal as it has done so in past. – Abhishek Kumar, SEBI registered investment advisor and founder of SahajMoney Another rule that has made citizens worried is that from the PF account, now the subscriber can withdraw up to 75% of balance. This if he does repeatedly, then, he would be left with comparatively reduced savings corpus for retirement. This would negatively impact the retirement corpus fund that people accumulate by investing in the EPF scheme. The concern that the latest liberalization measures on EPF withdrawals could negatively impact the retirement corpus is valid. The concern about erosion of long-term savings is not unfounded. Behavioral economics suggests that when access becomes easier, the temptation to dip into savings for non-critical reasons increases. Over time, repeated partial withdrawals can significantly reduce the compounding benefits that are essential for a robust retirement fund. – Abhishek Bhilwaria, CEO at Bhilwaria MF EPFO members depending entirely on their PF corpus for their retirement would indeed risk reducing their retirement corpus if they withdraw the full balance before retirement. – Abhishek Kumar, SEBI registered investment advisor and founder of SahajMoney