PF Withdrawal Rule Changed: Why EPFO Will Keep 25% Of Your Balance Locked

New Delhi: In an conversation with CNBC-TV18, Employees’ Provident Fund Organisation (EPFO) Chief Ramesh Krishnamurthi defended the new rule that mandates members to keep 25 percent of their provident fund (PF) balance locked, even when they withdraw the rest. He said the move is aimed at ensuring long-term financial and retirement security for workers.

According to Krishnamurthi, many employees tend to withdraw their full savings after leaving a job, leaving little for retirement. The new rule allows them to withdraw up to 75 percent of their savings, while the remaining 25 percent stays invested as a safety net for the future. This balance continues to earn interest at 8.25 percent per year under current EPFO rules.

He pointed out that frequent withdrawals harm financial stability. EPFO data shows that around 75 percent of members exit the scheme within three years, and many end up with a final balance of less than Rs 20,000 when closing their accounts. The new policy aims to change this trend by helping workers build a meaningful retirement corpus.

The EPFO has also increased the waiting period for full withdrawal from two months to 12 months after leaving employment. While some critics say this causes hardship, Krishnamurthi explained that the change helps members stay eligible for pension and insurance benefits linked to long-term membership.

However, in special situations, employees can still withdraw 100 percent of their savings up to twice a year without providing a reason. If a person remains unemployed for more than 12 months, even the locked 25 percent can be withdrawn.