The central government, following the announcement of PAN 2.0, is now gearing up to introduce EPFO 3.0, an upgraded plan with enhanced features for subscribers. As per an exclusive report, the Employees’ Provident Fund Organisation (EPFO) is considering removing the 12% cap on employee contributions to the Provident Fund (PF). This change would allow subscribers to contribute based on their savings preferences. Additionally, plans are underway to enable direct PF withdrawals through ATMs, making the process more convenient for users. According to ET Now, EPFO 3.0 may also offer the option to convert PF savings into a pension, adding greater flexibility and utility to the scheme.
ATM-based PF withdrawal by mid-2025?
The move also envisions allowing subscribers to withdraw PF amounts directly from ATMs, making the withdrawal procedure less cumbersome. The Ministry of Labour is also reportedly preparing to distribute cards so that PF may be withdrawn from ATMs. This facility is going to be introduced in May-June 2025 and will add to EPFO subscribers’ convenience in a big way.
The report further said that with EPFO 3.0, the government wants to grant employees greater autonomy over their savings. Further contributions could also be converted into higher pensions, thus improving long-term benefits, it said.
EPS-95 overhauling also on cards?
In a related development, the central government is said to be mulling over revising the Employees’ Pension Scheme 1995 (EPS-95). According to a PTI report on November 28, the Labour Ministry is looking into ways of permitting employees to contribute directly to EPS-95.
Currently, the contribution made by the employee himself amounts to 12% while that of the employer has to be divided between two different funds, EPS-95 at 8.33% and EPF 3.67%. Direct contributions by employees towards EPS-95 may influence the potential in EPF-95 may have an effect on the potential increase in pension benefits.
Additionally, the government will increase the ceiling for the EPF contributions’ wages. It will be the first hike since a decade with the last hike made in the year 2014 after raising the ceiling from Rs 6,500. The new limit would be Rs 21,000 and will jump by Rs 7,000 as claimed to enable better benefits for the retirees.
Key takeaways of EPFO 3.0
Withdrawals through ATMs:
The Labour Ministry is going to launch a card for the Provident Fund (PF) withdrawals through ATMs. Though, members will withdraw only 50 per cent of their total deposits amounting to this facility. The service will be available by mid-2025, perhaps during May-June.
No limit to employee deposits:
Another change under review is the elimination of the 12 percent cap on the employees’ contribution. This would ensure that employees have an increased option to make more contributions in order to grow their retirement savings. On the other hand, the employers’ contribution will be a fixed rate that is dependent on the salary of the employee.
Pension conversion option:
Additionally, it has planned to provide options for PF savings to be converted into pension plans for employees. With prior permission from the employee, it will also provide the means tosecure funds after retirement.
