• Jul
  • 02
  • 2011

Things People should know about Employees Provident Fund

Posted In Finance | , | 17 Comments » Print Friendly and PDF

1) Your PF entitles you to pension too

Despite the popularity of the EPF as a saving tool, not many people are enthused by or even aware of the Employees’ Pension Scheme. Introduced in 1995, it is funded by diverting 8.3%, or a little more than a third of your PF contribution. The pension on retirement is linked to the number of years in service and the average salary drawn in the year before retirement.

However, the scheme has failed to draw the EPFO’s 5 crore members because of the measly payouts associated with it. The reason is that since most employers pay PF only on the mandatory salary cap of Rs 6,500 per month, the pension income for a majority of workers is abysmally low, at times, less than Rs 1,000 a month.

It is, however, possible to get a higher pension income. “Good employers like Infosys pay Provident Fund contributions on the entire basic salaries,” says SC Chatterjee, the Central PF Commissioner. “If your basic pay is Rs 30,000 a month, employers can invest 24% of this amount into your PF account. “You will be entitled to a pension on the basis of your actual basic pay rather than Rs 6,500,” he adds.

For salaries up to Rs 6,500:

For salaries up to Rs 6,500, the government also chips in with a subsidy of Rs 75. This added up to Rs 994 crore for all EPF members in 2009-10. Another way smart employers help boost the pension is by raising the worker’s salary in the last year of employment.

“Suppose I earn Rs 25,000 and contribute 8.33% towards EPS. However, on my 57th birthday, my employer can raise my salary to Rs 1 lakh. Since my salary for the last one year will be Rs 1 lakh, I can get a pension of around Rs 50,000. So you can get twice your original salary as pension,” says Chatterjee.

However, for this to happen, the employer should have contributed his share to the Provident Fund on the actual basic salary, not the mandated limit of Rs 6,500 for the entire service period. Though this is not fair to other workers who are part of the pension pool, the pension scheme’s design makes this manipulation possible.

 

EPS money as a lump sum along with your PF balance

If you don’t want a pension from EPF, you can get the EPS money as a lump sum along with your PF balance. The benefit will not be linked to the actual contributions made, but to your last year’s average salary and the number of years in service.

What if: You retire early, die in harness, change jobs…

If you retire before the age of 58

Even if you stop working before reaching the age of superannuation, you can avail of pension benefits. However, you shouldn’t be less than 50 years of age. Also, the pension amount will be reduced by 2% for every year. So, if after working for 25 years, you take retirement at 50, your pension amount should be Rs 2,321 per month. But as you left service eight years before the age of superannuation, your pension will be reduced by 16%—it will be Rs 1,950.

 

If you have worked for less than 10 years

If you have completed less than 10 years of service, you can avail of the pension as a lump sum by opting for the withdrawal benefit. This amount will be provided to you on the basis of your annual contribution to the pension fund multiplied by the number of years that you have completed in service. You will also be entitled to a small interest on this amount, again depending on the number of years that you have been in service.

If you die before retiring

If you die while you are employed with an organisation, your pension benefit is not lost. Your legal heirs will be entitled to a pension, which is a maximum of Rs 1,000 per month (Rs 750 for spouse and Rs 250 for two children till they turn 25).

However, you should have put in a minimum of one month’s service to avail of this benefit. Also, the widow will not be entitled to a pension if she marries again, while dependent parents will be if the employee has no eligible family or has made no nomination.

If you change jobs

When you change jobs, and shift you PF account, your pension doesn’t automatically get transferred. You need to apply for a scheme certificate through Form 10C and route it through the new employer. The certificate has details of the previous employer and years of pension contribution.

“The PF account is linked to an individual, but the EPS scheme is pool-based and can’t be started all over again. So when you change jobs, your earlier service is not considered and it reduces the pension amount,” says Chatterjee.

 

2) Insurance benefits

Besides a monthly stream of income, the EPF subscription entitles you to an insurance cover on your life through the Employees’ Deposit Linked Insurance (EDLI) scheme. For this, your organisation contributes 0.5% of your monthly basic pay, capped at Rs 6,500, as premium.

Till recently the insurance amount was entirely linked to the balance in your PF. According to the new rules, your cover amount is higher of the two: 20 times the average wages of the past 12 months (up to Rs 6,500 per month), that is Rs 1,30,000, or the full amount in your PF account up to Rs 50,000 and 40% of the balance amount.

 

3) Claim interest on withdrawn amount

The EPF rate has to be declared at the beginning of every financial year so that all members withdrawing or retiring from the system through the year get the interest that is due to them. But in recent years, the EPF rate has become a matter of prolonged political debate and is often declared and notified much after the end of the financial year.

Till the rate is notified for a particular year, workers’ withdrawals are credited at the previous year’s rate. For instance, in 2010-11, the Labour Ministry announced a rate of 9.5%, but it is yet to be notified. So, lakhs of workers, whose PF claims have been settled so far, have lost out on the 1% increase over last year’s rate of 8.5%.

The Central PF Commissioner admits this is a problem, but has promised that his department will pay the difference to all the affected members. “If you have withdrawn your PF balance during this year while the government hasn’t notified the PF rate, you can approach your PF office later to pay you the higher interest rate on the balance,” says Chatterjee.

If, on the other hand, your claim is not settled within 30 days of applying, you can move the court. If it is established that the delay was due to ‘inadequate reasons’, you will be entitled to an interest on the balance at the rate of 1% for every month of delay.

 

4) Use EPF to fund the following

Have you finally zeroed in on your dream house but are running short of funds? Or perhaps your child’s education cost is more than you had planned for? At such times, it’s easy to fall back on your EPF savings. While you cannot withdraw the entire corpus to fund such needs, you can do so partially for specific occasions, such as children’s education, marriages, or for buying a house or a plot of land.

Go through the following list to find out when you can avail of this facility, the amount you can withdraw and the conditions you need to fulfill.

Marriage or education of self, children or siblings

–> You should have completed a minimum of seven years of service.

–> The maximum amount you can draw is 50% of your contribution (12% of the basic salary).

–> You can avail of it three times in your working life.

–> You will have to submit the wedding invite or a certified copy of the fee payable to the educational institution.

 

Medical treatment for Self or family (spouse, children, dependent parents)

–> You can avail of it for major surgical operations in a hospital or by those suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailments.

–> The maximum amount you can draw is six times your salary or the entire contribution made by you till date, whichever is less.

–> You must show proof of hospitalisation for one month or more with leave certificate for that period from your employer. You must also prove that you are not a member of the Employees’ State Insurance Corporation or are unable to use its facilities for surgery/treatment.

 

Repay a housing loan for a house in the name of self, spouse or owned jointly

–> You should have completed at least 10 years of service.

–> You are eligible to withdraw an amount that is up to 36 times your wages.

 

Alterations/repairs to an existing home for house in the name of self, spouse or jointly

–> You need a minimum service of five years (10 years for repairs) after the house was built/bought.

–> You can draw up to 12 times the wages, only once.

 

Damage due to natural calamity

–> You can withdraw up to Rs 5,000 or 50% of your contribution to the provident fund.

–> You have to apply within four months of the calamity.

–> As proof, you need a certificate of damage from the requisite authority and a calamity declaration by the state government.

 

Construction or purchase of house or flat/site or plot for self or spouse or joint ownership

–> You should have completed at least five years of service.

–> The maximum amount you can avail of is 36 times your wages. To buy a site or plot, the amount is 24 times your salary.

–> Can be avail of it just once during the entire service.

 

Equipment purchased by physically handicapped employees

–> You can draw up to six months’ basic salary and dearness allowance, or your share of PF contribution with interest, or the cost of equipment.

–> You will have to submit a medical certificate.

 

5) Premature withdrawal

Under the EPF Act, you cannot withdraw the full amount in your provident fund account before the age of superannuation. However, if you suffer permanent and complete disability or are moving abroad to settle, you can withdraw this amount. It is also possible to do so in case of mass retrenchment by the employer.

If, however, you retire voluntarily before you are 55 years old, you cannot withdraw the full amount. Under normal circumstances, you can withdraw up to 90% of the fund amount after you turn 54 or within one year of actual retirement or superannuation, whichever is earlier.

 

6) Have your grievances addressed

The EPF Organisation has a grievance redressal mechanism in place and it is covered under the Consumer Protection Act. The process of registering your grievance is simple. All you have to do is log on to epfigms.gov.in/. Since late last year, the EPFO has become a part of the Centralised Public Grievances Redressal and Monitoring System, which allows you to register the grievances and track their status online.

It’s a centralised system, so all your complaints are also monitored by the head office. “We reply to all the grievance within 30 days of their receipt. If someone is not satisfied with the response, he/she can come and meet me,” says Chatterjee.


17 Responses to “Things People should know about Employees Provident Fund”

  1. Unnikrishnan says:

    I attained 50 years, left the service after working for 25 years and opted for withdrawal benefit as well as pension. My query – Under the circumstances, in case of a new employment, am I eligible for PF membership in my new employment or not? Because I opted for withdrawal & pension on my earlier employment, am I become ineligible for PF membership/deduction with my new employment. Kindly clarify.

  2. Anurag says:

    Thanks for a good informative article.

    I have the same query as M.Shanmuganathan raised on 2nd July 2011………. the pension is calculated based on last drawn basic (subject to ceiling of Rs.6500/- even though contribution has been made for full basic), since PF organisation get only Rs.541/- maximum to their Pension account from employer contribution. Balance amount of employer contribution is credited to employees PF account.

    Please clarify.

    regards
    Anurag Dalela

  3. vaibhav says:

    DEAR SIR/ MAM , MY SELF VAIBHAV AGARWAL WORKED AT IT PRIVATE COMPANY ,AGE 55
    Can you please advise me if my employer can raise my salary to Rs 80000 from 35000 how much i get benifits..in pention

  4. deepak kaushal says:

    i worked in a company from 01-08-2008 to 31-05-2012. How many benefits related to the e.p.f., bonus & all other financial benefits i can get from the company. please reply at the earliest as i am urgent need of the money. 

  5. kishor says:

    I had sent following message to EPF office.

    QUOTE:
    I retired on 30-10-2010 from Torrent Power Ltd, Ahmedabad. I was paid total EPF balance amount through ECS on 16-12-10. While paying this amount as full settlement interest for the period 01-04-2010 to 16-12-2010 was calculated as per then prevailing rate of 8.5 %. Subsequent to this EPF final interest rates were revised to be 9.5 % for the year 2010-2011by govt of India. For which Govt Of India issued circular to all PF office during March 2011 to pay 9.5% interest for year 2010-11. Copy of circular attached herewith.

    Hence a interest difference of 1 % is due to me by EPF office for the period of year 2010-11.(Interest Difference may be calculated for the period 01-04-2010 to 16-12-2010 on entire balance amount up to 31-03-2010 & contributions from 01-04-2010 to 16-12-2010.)
    UNQUOTE:

    EPF office has rejected my claim & answered as under:

    QUOTE:
    This is with reference to your Grievance registered vide Registration Number ROAHM/E/2012/00098.
    It is informed that after processing your grievance,the following action(s) has been taken:
    The member has been intimated vide this office letter No.1675 dt:27/03/2012 that at the time of settlement of the claim, interest was paid as per the rate of interest declared in the Government Gazette.

    Therefore, we are closing your grievance from this office.Please quote the same in your future correspondence.
    UNQUOTE

    Can you please advise me further on that if EPF member retires in mid of the year & then Govt. increase rate of interest for year gone, will he be entitled to get interest difference OR not. IF not under which reference of EPF act/rule the same is not payable.

    PPF Account number: GJ/872/29227
    Name: Kishor Raghunath Barhate
    Address: 66, Sabarbag society, Sabarmati, Ahmedabad, 380005
    Mobile 9866192006, 9925450267

  6. SRINIVAS says:

    I have not withdrawn my PF from my previous companies for the last 3 years.Incase I transfer them to my cuurent company’s PF account,will I be able to get the Pension benefit.I have still 7 years of service left for retirement.Please advise.

  7. Prabhakar Bonde says:

    1.I have recd full & final settlement from Regional PF Commissioner
    Office of CPFC (West)
    Bhavishya Nidhi Bhavan kandivali (west)
    Mumbai
    2. I was informed by PF officials that the details of pay out amount and corpus will be intimate by post to me. Nothing is recd to me nor the detail document available with disbursing bank 3.Six have already passed What next should I do?
    . Thanks if anyone can help.

    regards

  8. RN says:

    I guess you have been employed by the contracting company as a consultant so they are not contributing to EPF.In fact I feel this is a blessing in disguise as you will bypassing the corrupt and inefficient EPF dept.But this should not prevent you from getting benefit of PF.You can contribute by opening a SBI PPF account.Interest rate is slighltly lesser than EPF at 8% but you will get internet banking and complete transparency.You can also open NPS(NEw Pension Scheme) account and contribute.

  9. sandeep says:

    i work in a psu on contract, but on direct payroll of the company, i get 16000p.m as lumpsum amount. the company doesnt deduct PF, and on asking why? they says, i am getting consolidated salary. i just want to know,

    1. that is there any clause can inhibit my PF to be deducted, althought they are deducting PF from permanent employees and also pays PF to the contractor employees working for IT dept. can there be so many policies for different employees.

    2. where i can get appropriate response regarding my grievence as a worker without coming into limelight.

    3. and can a psu be run without any policy like mine is running, and how i can have the policy or rules governing their policies.

    thanks if anyone can help.

    regards

  10. kalyani says:

    This is a very important mail. Thanks for furnishing the information

    with best regards
    kalyani

  11. Sandesh R. Sarode says:

    Hello Sir,

    This is genuinly informative subject which you shared with us. I am very greatfull to you.

    Best Regards,
    Sandesh R. Sarode

  12. Ritesh Tiwari says:

    “Thanks for this useful infomation”

  13. M.Shanmuganathan says:

    Thanks for a good informative article.

    Dear sir,

    I think that, the pension is calculated based on last drawn basic (subject to ceiling of Rs.6500/- even though contribution has been made for full basic), since PF organisation get only Rs.541/- maximum to their Pension account from employer contribution. Balance amount of employer contribution is credited to employees PF account.

    Please clarify.

    regards

    M.Shanmuganathan

  14. rao says:

    Shri Pradeep Kulkarni 29/04/2011
    Regional PF Commissioner
    Office of CPFC (West)
    Bhavishya Nidhi Bhavan
    341, Bandra (East)
    Mumbai – 400 051

    Dear Sir,

    Sub: Violation of PF Act/Norms of Regd Pvt PF Trust/Harassment/Cheating

    Ref: Reg No.MH/BAN/19844/EXAM of Shapoorji Pallonji, Colaba, Mumbai
    Our Letters Dt. 11/03/2011 & 04/01/2011

    Please find enclosed KEY-DATES in my SP’s Final Settlement (as Annex – 1). In-spite of Sending Both EPS + PF Docs to SP Trust on 16/July/2010 (Confirmation by Ms Shika by e-mail, as Annex – 2), my Trust Cheque (Copy of Receipt as Annex – 3, Intt given up to Nov’10 Only) was got issued in Jan’11, i.e., 192 Days after leaving!.

    This attitude of SP is in-spite of their taking 68 Days in declaring FFS Figures on 02/Sept/2010 & my making Payment on 17/Sept/2010 vide Cheque No. 254716 of HDFC Bank. The amount got transferred to SP Account on 21/Sept/2010 (Copy of Bank Statement as Annex – 4).

    On receipt of Trust Cheque, we have raised Interest/Counter Claim on Trust for Dec’10 Intt/along with “”Justification for Abnormal Delays”” & SP is least bothered to respond the same. One of such recent letter Dt. 25/04/2011 is being attached (as Annex – 5) for your immediate ref., As on date, even SP has not updated us status of EPS (Papers sent on 16/July/2010) realization.

    This heinous treatment of SP is in-spite of their knowing fact of my being an Professional (CA-1999). After 109 Days of Hand-Over of Safe-Keys on 24/Sept/2010, they have alleged using of SP’s Cash for my personal purposes without any records. The very intentions of SP is quite self-explanatory, DON’T want to Pay.

    This is apart from of SP forcing us to move in and around various Police Stations as HARASSMENT (for raising similar questions to Sr Mgt) & for our Continuous Follow for hard earned monies by mere misusing of Image & False Feed Back.

    I could not be able to understand how many ex-employees got victimized due to mal-practices of SP & Hence, sincerely requested to kindly do the needful as per RELEVENT SECTIONS OF PF ACT/NORMS OF REGD PVT TRUST/IPC apart from of issuing cheque for my EPS amounts for which Docs were already submitted to SP on 16/July/2010.

    Regards,

    CA Rao
    Encl – a/a – Total Annex’s 5
    CC – PF-Delhi, SP Trust, SP Legal, SP’s Director/CEO, PSI (Lonibar, M Wadi & Colaba)

  15. Rahul Mukherjee says:

    Very informative subject. Thanks for the same.
    Regards.

  16. Ankur Pandey says:

    thnks for such nice information

    sir, i have one query regarding my epf a/c
    At present , my pension contribution is 8.33% (as per company policy)
    but i want only 541 as pension contribution ,rest in my epf balance

    my account is 6 month older,this is my first job, can i apply for change in pention contribution..if yes ,how?

    thnks in advance

  17. K. Vinodh Kumar says:

    Thanks for the very informative article. I have a small clarification regarding transfer of PF with reference to the EPS.

    When we transfer the PF, whether the pension money is also getting transferred, along with it. And the purpose of Form 10C, is it only for transferring the service years of pension calculation later.

    With thanks & regards,
    Vinodh

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