More workers dip into EPF savings amid job losses, salary reductions2 min read . Updated: 01 Jul 2020, 05:53 AM IST
- EPFO currently manages savings of around 57.44 million active subscribers
- Since 1 April, more than 5.5 million salaried workers have withdrawn money from their Employees’ Provident Fund (EPF) accounts
As many as 100,000 people a day have dipped into their statutory retirement savings on an average in the past three weeks as they grappled with income and job losses, a factor that may hold back a swift economic recovery.
While established companies have let go of their employees because of covid 19-related disruptions, new jobs are being created at a snail’s pace, data from the Employees’ Provident Fund Organisation (EPFO) accessed by Mint showed.
Since 1 April, more than 5.5 million salaried workers have withdrawn money from their Employees’ Provident Fund (EPF) accounts, the data showed. More than 5.58 million claims worth around ₹15,000 crore have been settled so far this fiscal by the pension fund manager, according to the data.
The fact that close to 2 million people have withdrawn their savings between 9 June and 29 June points to the fact that hardships of India’s salaried class continue even after the government has eased lockdown curbs.
Of the total withdrawals since April, nearly 60% were non-covid withdrawals, said a government official, requesting anonymity. While covid-19-related withdrawals were designed as a temporary measure to help EPFO subscribers during the lockdown period, non-covid withdrawals reflect rising instances of job and income losses.
As many as “5.57 million on last count…It’s a huge outgo and reflective of the market conditions caused by the covid-19 pandemic", the government official added.
“The covid-19 advance has been a great help to EPFO’s members during these difficult times, especially for members with monthly wages of less than ₹15,000. Receiving the covid-19 advance to the extent of basic wages and DA for three months or up to 75% of the amount standing to member’s credit in the EPF account, whichever is less, has provided timely relief to many workers, preventing them from falling into indebtedness," EPFO had said in a recent statement.
The retirement fund manager has been claiming that its technology adoption in recent months has helped it make faster payments and ensure “social security support for its members in times of crisis".
Though a fresh breakup of withdrawals data is not immediately available, the EPFO had in June said that a look at wage slab-wise data indicates that more than 74% of the total claimants during the lockdown period were subscribers who earn less than ₹15,000 a month each.
While approximately 24% of claims were made by members with wages falling between ₹15,000 and ₹50,000 category, the high-income category with wages of more than ₹50,000 per month accounted for a mere 2% of the claimants.
This data suggests about 1.4 million relatively decent wage earners are struggling, too, or may have lost jobs or resigned due to the prevailing crisis.
Besides the hardships the salaried class is facing, the high withdrawals will also lead to a substantial income loss for the fund, a smaller corpus for regular investments, and crimp its ability to earn a better return for subscribers in 2020-21. EPFO currently manages savings of around 57.44 million active subscribers.