This move will offer financial security to employees who may have lost their jobs.
There is some good news for subscribers of the Employees Provident Fund Organisation (EPFO) if they intend to quit their jobs. Employees are now allowed to withdraw 75 per cent of their total provident fund kitty within a month from the date of cessation of service, to meet their monthly financial commitments.
In fact, members will continue to be offered the choice of withdrawing the entire amount, or closing the account, after two months.
This decision was taken at the 222nd Central Board of Trustees (CBT) meeting of EPFO.
This move is aimed at offering financial security to a great extent to employees who may have lost their jobs. Moreover, the subscriber may not withdraw the remaining amount, thus ensuring he continues to get social security on the existing account.
In the present situation, the EPF Scheme 1952 allows final withdrawal after two months from the date of cessation of employment of the member, as a result of which many members end up withdrawing the entire amount. By doing so the account gets closed leaving no social security cover for subscribers.
CBT, the highest decision-making body of EPFO, comprises equal number of representatives of employees, employers and state government. It is chaired by the labour minister.
“EPF Scheme 1952 does not have provision for advance to members during such kind of non-employment, and the scheme allows only full and final settlement. This compels members to withdraw the entire amount. Such early closure of membership also goes against the objective of providing social security to the members and family,” the CBT agenda note said.
CBT has also decided to extend the term of SBI Mutual Fund and UTI Mutual Fund, the two fund managers for EPFO investment in ETFs, by one year, to July 2019. Their term was due to end on June 30, 2018.
Commenting on EPFO’s investments in equity, Labour Minister Santosh Kumar Gangwar said, “We can achieve Rs 1 lakh crore in equity investment in less than a year. It’s a big amount and so we have to be careful.”
This was followed by 16.07 per cent return on Rs 34,603.64 crore invested in SBI Mutual Fund. Thus, EPFO’s overall return on ETF investments of Rs 47,431 crore till May this year stands at 16.07 per cent.
EPFO plans to credit ETF investments in the PF accounts this fiscal only and thereafter, it would give an option to subscribers to hike or cut investments in ETFs from their funds.
EPFO trustees had already approved the accounting policy for the purpose of crediting ETF investments into PF accounts. The body is in the process of developing and testing the software for the purpose.