A recent wave of concern has swept through employees about the claim that 25% of their Employees’ Provident Fund (EPF) balance is locked and cannot be withdrawn until retirement. This widespread belief left many anxious about their financial flexibility. But what is the real story behind this claim?
Clarifying the EPF Withdrawal Rules
Contrary to the popular misconception, the so-called permanent locking of 25% of an EPF account balance is not accurate. Employees can indeed access their full EPF balance under certain conditions.
These conditions include circumstances like retirement at the age of 55 or above, permanent disability, retrenchment, voluntary retirement, long-term unemployment, or migrating abroad permanently.
For instance, if an employee faces unemployment for over a year, they become eligible to withdraw their entire EPF savings, including the portion people assumed to be locked.
The Purpose Behind Partial Locking
The EPF system encourages people to save consistently for their retirement by ensuring that part of the fund remains untouched until the right time or qualifying life event. This prevents premature depletion and helps build financial security for old age.
The intent is to promote disciplined saving habits among workers who might otherwise withdraw their funds for short-term needs, leaving themselves without a pension corpus for the future.
Debunking False Narratives
The narrative that 25% of EPF is locked “forever” contradicts the official provisions governing EPF withdrawals. This myth was debunked by government fact checks, which emphasized that employees have the right to withdraw more than 75% of their contributions even before retirement, subject to meeting the official criteria.
Moreover, these rules were introduced considering the balance of financial security and flexibility for workers during periods of unemployment or other hardships.
What Employees Should Know
EPF continues to be a cornerstone of retirement planning for millions of salaried employees in India. Its fund management ensures safety, good returns, and tax benefits.
Workers should remain vigilant about misinformation and rely on verified government channels for updates about their EPF accounts.
The bottom line is that employees have far more access to their funds than the myth suggests. The idea of irreversible locking of 25% of the EPF balance is simply not true.
