PF WITHDRAWAL RULE CHANGES: FOR ONCE, EPFO HAS STRUCK THE RIGHT BALANCE

For those following India's pension space, 2016 was a watershed year.

- AMIT GOPAL

The government split provident fund settlements into two: one at leaving service and the rest at 58. Employees protested, sometimes violently-a first for an EPF issue.

Last week, memories of 2016 resurfaced when the Employees' Provident Fund Organisation (EPFO) revised guidelines on partial and final PF withdrawals. The internet erupted, with many fearing employee deprivation. These fears are misplaced, arising from a misunderstanding of EPF's objectives.

For the longest time, the EPF has not only been a fund for oldage retirement savings but also to fund select life goals. These were possible through limited withdrawals from a member's balance for specific purposes. House acquisition, repayment of home loans, children's education, marriages, or distress in case of job loss were defined purposes for premature withdrawals.

Ludicrously, withdrawals were also allowed if one could not pay electricity bills (seriously, yes).

At first glance, these seem like leaks in the corpus, but the rules were framed long before the lending industry came into being, when the EPF was a primary savings vehicle for the salaried.