EPFO 3.0 is designed to improve member services by introducing plans for increased pension contributions and an ATM-like card for direct withdrawals, expected to be implemented by mid-2025
The Ministry of Labour and Employment is set to introduce EPFO 3.0 by June of next year. This initiative aims to implement various changes to the Employee Provident Fund (EPF), including the removal of the 12% contribution cap for employees and enabling withdrawals from Provident Fund accounts through ATMs.
As per Current situation EPF members must wait 7 to 10 days for the withdrawal amount to be credited to their bank account linked to their EPF account. This period begins after they have completed all withdrawal formalities and submitted the necessary documents to the EPFO.
The government is preparing to implement a range of measures to improve services for EPFO members through the EPFO 3.0 initiative. Reports indicate that the Union Labour Ministry is exploring options to increase employees’ pension contributions and to introduce an ATM card, similar to a debit card, which would enable direct withdrawals from ATMs. This scheme is expected to be launched by May or June 2025.
At present, both employees and employers contribute 12% each to the Employees’ Provident Fund. Of the employer’s contribution, 8.33% is allocated to pension deductions under EPS-95, while 3.67% goes to the EPF.
Media reports indicate that the government is contemplating the removal of the 12% cap on employee contributions to the Provident Fund. This change would allow employees the flexibility to contribute more based on their savings. However, the employer’s contribution will continue to be fixed and calculated as a percentage of the employee’s salary.
The government is preparing to increase the wage ceiling for EPF contributions, marking the first adjustment in a decade since the 2014 revision that raised the limit from Rs 6,500 to Rs 15,000. According to a report, the new ceiling may rise by Rs 7,000 to Rs 21,000, which would enhance retirement benefits for employees.
Currently, the full 12% employee contribution is directed into the EPF account, whereas the employer’s contribution is divided between EPS-95 (8.33%) and EPF (3.67%). With the proposed changes, employees would have the opportunity to enhance their pension benefits by contributing directly to EPS-95.
The EPFO allows members to contribute additional amounts through the Voluntary Provident Fund (VPF). Employees can opt for PF deductions that exceed their mandatory 12% contribution. The maximum contribution to the VPF can be up to 100% of the basic salary and dearness allowance, earning the same interest rate as the original contributions.
The EPFO card will function like an ATM card, allowing withdrawals of over 50% of the balance, similar to a bank account. Additionally, the government is working on reforms to the Employees’ Pension Scheme 1995 (EPS-95). Currently, 8.33% of the employer’s contribution goes into EPS-95, but the proposed changes may allow employees to contribute directly to the scheme, potentially increasing their pension payouts.
So the withdrawals will be restricted to ensure retirement funds are preserved while still providing liquidity for emergencies. The Labour Ministry is also considering removing the 12% cap on employee contributions, enabling workers to save more. The Ministry aims to provide employees with the flexibility to save according to their preferences. There has been no discussion yet regarding an increase in employer contributions.
The EPFO 3.0 initiative is set to introduce significant changes aimed at enhancing the services offered to members of the Employees’ Provident Fund Organization (EPFO). Key features of this initiative include:
ATM Withdrawals, Increased Contribution Flexibility, Higher Pension Contributions, Wage Ceiling Increase.
These reforms aim to provide greater financial flexibility and improved retirement security for EPFO members, with a focus on empowering employees in managing their savings.
For more – https://www.epfindia.gov.in/site_en/circulars.php
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