NEW DELHI: In a bid to dispel confusion and misinformation, the Labour Ministry on Wednesday issued a clarification saying that contrary to the belief that no withdrawal is possible, the new rules allow for an immediate 75% withdrawal upon leaving a job.
“If the individual remains unemployed for one year, the entire balance can be withdrawn,” clarifies the ministry.
This change, the ministry argues, is designed to protect the subscriber’s long-term interests. The previous system of frequent, partial withdrawals often led to breaks in service history, which was a primary reason for the rejection of many pension claims. It also left employees with a very small final settlement amount.
“These new provisions will ensure continuity of service, a healthy final PF settlement amount, and no financial hardship for the family,” the ministry clarifies.
Also, countering the myth that 25% of an employee’s funds have been locked in, the ministry stated that the old system was fraught with complexity. It involved 13 different categories, each with numerous conditions that often led to funds getting stuck.
“The entire process has been simplified into a uniform provision,” the ministry document explains. “This will now allow for easy withdrawal without any cumbersome documentation in most cases.”
The ministry emphasised that in almost all scenarios, the permissible withdrawal amount or frequency has been increased, not reduced.
A key reform highlighted is the reduced waiting period for withdrawals for specific needs like marriage or purchasing a home. Previously, subscribers had to wait 5 to 7 years; the new rules allow them to access funds for these purposes after just one year of service.