Change often meets resistance—even when it’s for the better. The Employees’ Provident Fund’s latest overhaul, EPF 3.0, triggered a wave of backlash on social media.

The new system simplifies the complex maze of withdrawal rules by merging multiple categories into just three. Withdrawals can now be made after 12 months, instead of the earlier 5-7 years for different needs.

Processes have gone fully digital, making claims quicker and smoother. Subscribers can now access funds for education, marriage, or home purchase—and in case of emergencies, withdrawals require no proof. The number of withdrawals for education or marriage has increased significantly, making the money far more accessible to subscribers for their requirements.

If unemployed, members can withdraw 75% immediately and the remaining 25% after 12 months, ensuring liquidity without dismantling their retirement corpus. Pension withdrawals are permitted after 36 months. These longer tenures would allow a person to find a job in this period and continue this account for their own benefit.

The ministry of labour has since clarified that these changes aim to make the fund more accessible, not restrictive—a clarification that should settle what was, in essence, a storm in a teacup born of misunderstanding.

The real issue: what EPF has become

The bigger concern lies beyond the reforms themselves. EPF was designed to help people retire with dignity, but today, it’s often treated like a short-term investment account.

Data from the EPFO shows that half of all subscribers have only ₹20,000 in their accounts at maturity, while three-fourths have less than ₹50,000. This is a worrying sign—it means the fund is not serving its true purpose of building a sustainable retirement corpus.

Staying true to mandate

The EPF was designed to help individuals build a corpus that could at least partly fund their retirement. Even with existing restrictions, it has struggled to fulfil that purpose. This isn’t to say the product lacks merit—but its essence is being diluted.

Allowing more frequent and flexible withdrawals, without adequate checks, risks defeating its original goal. If the proposed changes go through, many subscribers could end up depleting their savings long before retirement—certainly not what the scheme’s creators intended.

It may be an unpopular view, but restricting withdrawals to a certain limit—say, up to 50% of the employee’s own contribution—would help preserve some amount to compound and grow meaningfully for retirement.

The trend of making retirement products like EPF and NPS increasingly flexible is undermining their very foundation. In the process of making them more liquid and attractive as investment tools, we’re losing sight of their true purpose: long-term financial security.

Financial planners advise

With people living well into their nineties today, retirement planning needs more discipline than ever. The days of relying on children for post-retirement support are gone—most individuals now prefer financial independence.

That makes it essential to safeguard retirement savings instead of dipping into them like a candy jar. EPF and NPS are just two pieces of the retirement puzzle; building a sufficient corpus—often running into crores—will also require diversified investments and patience.

The outrage over EPF 3.0 will eventually fade. What must remain is a renewed focus on the seriousness of retirement funding—and a reminder that the best time to start securing your future is always now.

Suresh Sadagopan is the MD & Principal Officer at Ladder7 Wealth Planners and the author of the book “If God Was Your Financial Planner.”