The Hindu Business Line : EPFO proposes bar on early withdrawal of PF contributions

PREMATURE withdrawal of provident fund accumulations by subscribers of the Employees' Provident Fund Organisation (EPFO) who exit in mid-course could soon be a thing of the past. Alarmed at the rising trend of early withdrawals that threatens old-age income security of Employees' Pension Scheme members, the EPFO is proposing to ban withdrawals prior to the superannuation age of 58 years.

Instead, the EPFO has proposed that the Scheme Certificate route should be the only option available to those exiting before the superannuation age. The certificate is an instrument issued in lieu of the contributions made by a member and can be used to re-enter the EPFO scheme on re-employment.

The restriction on withdrawal would require an amendment of the EPS Scheme, 1995, that provides both the withdrawal facility as well as the certificate option. The proposal is currently being discussed with the Government and the leaders of the major central trade unions and is likely to be placed at the next meeting of the EPFO's Central Board of Trustees.

Under the present set up, the EPFO is unable to curtail early withdrawals. "The average settlement taken by members on superannuation is not capable of even giving a minimum (pension) of Rs 250 per month even by a generous annuity scheme such as the Varishta Bima Pension Yojana. The lump-sum benefit is also so meagre it is not capable of addressing the needs of the retiree and his family even for a year or two," the EPFO has pointed out.

Thus, while superannuation claims to total claims has gone down from 4.36 per cent in 1997-98 to 2.41 per cent in 2003-04, the average amount settled has gone up from Rs 16,290 to a mere Rs 36,742 per member during the period.

"Since withdrawals are defeating the very purpose of providing the social security benefits of monthly pension, the only remedy in this regard is to amend Para 14 of the EPS, 1995, to settle the benefits only at thesuperannuation age, i.e., 58 years," the EPFO has said.

Scheme Certificates would be issued if a member exits before completing 10 years of service. In the event of re-employment, the earlier spell of service would be added to commute pension benefits. Under the scheme, a member becomes eligible for pension after completion of 10 years of eligible service.

In the event the total years of service under different spells of employment is less than 10 years, the member would be allowed to withdraw the accumulated amount on reaching 58 years.

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