BENGALURU, Oct 29 : In a reform that could transform India’s social security landscape, the Employees’ Provident Fund Organisation (EPFO) proposed retaining pension fund accounts for three years after an employee exits service, ensuring that if the member dies within this period, their spouse and children will be entitled to pension benefits.
The proposal, revealed by EPFO Commissioner Salil Sankar, marks a major shift from the existing rule under which non-pensionable members – those with less than ten years of service – lose all future pension rights immediately upon withdrawal of their funds.
“This move is meant to provide continuing social protection to families even after the member has left employment,” Sankar said.
“In several cases, we have seen workers withdraw small pension fund amounts and die within a year or two, leaving their dependents without any support. The new system ensures that their families will not be left destitute.”
Under the proposal, the pension fund cannot be withdrawn for three years after an employee leaves a job, even if they are not yet eligible for a pension. During this retention period, the member’s family will continue to remain covered under the Employees’ Pension Scheme (EPS). If the member dies during that time, the surviving spouse and children will receive monthly pension benefits, as per the prescribed formula.
Sankar said this measure would particularly benefit lakhs of contractual, informal, and short-tenure workers who frequently change jobs and fail to complete the ten-year eligibility period for pension.
“This is a socially conscious reform,” Sankar explained. “It strengthens the welfare aspect of the pension fund without imposing any additional burden on employers or employees. The intent is not to restrict withdrawals, but to ensure that members’ families continue to have some income security,” he said.
EPFO data shows that a large number of exiting members – particularly women and low-income workers – withdraw their entire PF and pension fund balances within months of leaving employment, often depleting their savings early. The proposal seeks to balance liquidity with long-term family protection.
The recommendation, part of a broader set of EPFO reforms approved by the Central Board of Trustees (CBT) on October 13, will take effect after the Ministry of Labour and Employment issues a formal notification.
If implemented, experts believe it could be one of the most progressive measures in India’s pension history – quietly ensuring that even those who exit employment early leave behind a lasting financial shield for their loved ones.
The EPFO has proposed allowing members to withdraw up to 75 per cent of their provident fund balance after one year of service, while retaining the remaining 25 per cent for future savings.
Sankar said the move, approved by the Central Board of Trustees (CBT) on October 13, aims to strike a balance between liquidity and long-term protection, ensuring workers have immediate access to funds without compromising their retirement corpus.
In another key reform, EPFO has proposed keeping pension fund accounts active for three years after an employee exits service, allowing families to claim monthly pensions if the member dies within that period.
The organisation has also simplified advance withdrawal rules for housing, education, and marriage, cutting the minimum service requirement from five to seven years earlier to just one year, making the system more responsive to members’ real-life needs.
Additionally, the EPFO plans to launch the Employees’ Enrollment Campaign 2025, a one-time amnesty scheme for employers to regularise unregistered employees without facing penalties, by paying the employer’s contribution, 7 per cent interest, and a nominal Rs 100 fee.
Sankar said over 99.7 per cent of accounts are now Aadhaar-verified, reflecting EPFO’s push towards digitisation and transparency.
These reforms, once notified by the Ministry of Labour and Employment, are expected to make India’s social security network more flexible, inclusive, and dependable. (UNI)
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