New Delhi: In a worker-friendly decision, the Employees’ Provident Fund Organization (EPFO) on Tuesday allowed subscribers to withdraw 75% of the accumulated corpus one month after losing a job. The move is expected to have twin benefits—allowing quick withdrawal of the money, while keeping the account active even after unemployment.
“We have decided to amend the scheme to allow members to take advance from its account on one month of unemployment. He can withdraw 75% of his fund as advance from the account after one month of unemployment and keep its account with the EPFO (active)," labour minister Santosh Gangwar told reporters after a meeting of the central board of EPFO.
A subscriber needs to contribute to his PF account consecutively for at least 10 years to become eligible for pension. However, it has often been observed that a person closes his or her PF account two months after losing a job, something that affects the person’s pension eligibility.
“We are trying to give subscribers a window to take out a sizable portion of the corpus, yet not close the account. When he gets a new job, he can transfer the old account money to the new account with the new employer," said central PF commissioner V.P. Joy.
EPFO has an active subscriber’s base of over 55 million and manages a corpus of over 10.5 trillion.
The central board of EPFO has also sought the approval of the finance ministry before taking a call on diversifying its equity portfolio beyond the Nifty 50 and Sensex 30 stocks. Technically, an approval from the finance ministry is required, given that it is the authority to notify investment patterns of PF funds.
An EPFO finance advisory committee and its investment consultants have favoured investing in Nifty Next 50, Sensex Next 50 and Sensex Select Midcap exchange traded funds. So far, the EPFO have been investing only in Nifty ETFs and Sensex ETFs, which mimic the broader indices.
After due consultations in the EPFO and the labour ministry, a strong view has emerged that to maximize returns, it has to broaden its ETF portfolio from just two categories to five. “The equity portfolio diversification was discussed in the board meeting. There is nothing wrong with the plan but some members feel that it is better to take the finance ministry approval first before announcing the decision. Meanwhile, we can have some more discussions on the subject," explained Joy.
An EPFO official, who declined to be named, said that “the diversification will happen within the next three months. Sometime, ministries have to follow certain formal protocol". All the three Indices being considered for diversification -- S&P BSE MidCap Select Index, S&P BSE SENSEX Next 50 and Nifty Next 50 -- fare better in the composite weighted score and rank compared to the Nifty 50 and S&P BSE SENSEX.