EPFO faces challenge of young subscribers withdrawing full PF corpus

The power of compounding! That is the beauty of deposits in retirement savings such as the Employees’ Provident Fund that is currently offering an interest of 8.25% on contributions.

Concerned with a high number of withdrawals by young subscribers, the Employees’ Provident Fund Organisation is looking at strategies to address this problem and how it can be addressed.

“In several instances, it is found that subscribers withdraw their entire PF corpus at the time of change of jobs. Maintaining their PF corpus can help them not only prepare for retirement or needs such as house building or marriage of children during their working lives, but it also ensures that they get a handsome return due as the corpus grows,” officials have pointed out.

Sources indicated that the EPFO is trying to explore strategies to encourage the habit of retirement savings, especially amongst young subscribers.

Under the current EPF rules, a member can withdraw the entire PF corpus after retirement. However, the rules permit that members can also withdraw up to 75% of the PF corpus after one month of unemployment and 100% of the corpus after two months of unemployment.

While the objective of the rule is to ensure that workers who face job losses or unemployment can fall back on their PF corpus to tide them over, often, EPF subscribers after resigning from the job, withdraw their corpus after a two month wait.

Officials said that this can be for several reasons such as investing in other instruments such as equities where the returns may be higher or using the corpus for some purchase. “Many times, young people feel that there is no need to start saving for retirement as it is several years away. But by saving from the start of their careers, they will have a healthy sum of money when they retire. This is especially crucial given that in the private sector, most workers do not get a pension,” noted a source.

According to official data, the EPFO received a total of 7.1 million claims for final PF settlement between April 1, 2024 and March 7 this year. Of this, it had settled 50 million claims amounting to Rs 55,133.52 crore. The number of EPFO member accounts have increased to 325 million from 117 million during the last 10 years from FY15 to March 7, 2025.