Why the New EPFO Rules Are Facing Criticism Despite Good Intentions

Among the major changes:

• The waiting period for full EPF withdrawal after job loss has been extended to 12 months (earlier 2 months).
• Pension withdrawal is now allowed only after 36 months of unemployment.
• Members can withdraw up to 100% of their eligible EPF balance under certain approved conditions.
• The earlier 13 categories for partial withdrawals have been merged into three broad purposes — Essential Needs, Housing Needs, and Special Circumstances.
• A new rule requires maintaining a minimum balance (around 25%) in the EPF account to protect retirement savings.
• The Centralized Pension Payment System (CPPS) has been introduced to streamline pension disbursements nationwide through the NPCI (National Payments Corporation of India).
• Aadhaar-linked UANs now allow simpler profile corrections and transfers, reducing paperwork and employer dependency.
• The interest rate for 2024–25 has been fixed at 8.25% per annum.

Government’s Intention Behind the Reforms
According to officials, the reforms aim to achieve multiple goals:

1. Encourage long-term savings – ensuring workers don’t deplete their retirement funds too early.
2. Modernize EPFO’s systems – through digital tools and centralized processing to cut delays and errors.
3. Offer flexibility – by allowing more reasons and simpler processes for partial withdrawals.
4. Improve transparency – making it easier to track contributions and pension payments.
5. Adapt to modern work trends – allowing smooth fund transfers as employees change jobs or industries.
6. Strengthen pension sustainability – by offering options for higher pension contributions and standardising processes.

The government argues that India needs a strong, reliable social security base as the workforce becomes younger, mobile, and more digital.

Why People Are Criticising the Changes
Despite good intentions, the new rules have triggered mixed reactions among the workforce.
Here’s why many are unhappy:

1. Longer waiting time during unemployment
Extending the full withdrawal period from 2 months to 12 months has upset many. Critics say that unemployed workers often depend on PF savings for survival, and the delay could worsen their financial stress.

2. Limited access to own savings
The rule requiring a minimum balance of around 25% restricts employees from withdrawing their full amount. Workers argue that this is their own money, and they should decide when and how to use it.

3. Complexity and frequent policy shifts
EPFO has updated its processes multiple times in recent years, leaving employees confused about the latest rules. Experts say the new digital and procedural requirements could overwhelm less tech-savvy or rural workers.

4. Impact on low-income and contract workers
Those in unorganized sectors or small factories often rely on PF withdrawals for emergencies. Critics argue the reforms favor organized, salaried employees but make it harder for low-income workers to access funds.

5. “Higher Pension” scheme confusion
While EPFO clarified rules for pension on higher salaries, the application process remains technical and bureaucratic. Many employees complain they are unsure how to apply or verify eligibility.

6. Interest rate concerns
At 8.25%, the PF interest rate is stable but barely above inflation, reducing the real value of long-term savings. Critics say the government should focus on improving returns rather than tightening withdrawal rules.

7. Digital divide challenges
While Aadhaar-linked updates and online portals are efficient, system errors, verification failures, and connectivity issues still make the process frustrating for many users — especially pensioners and rural employees.

Supporters vs. Critics: The Bigger Picture
Supporters say the new rules mark a turning point in India’s social security structure — encouraging disciplined savings and reducing misuse of retirement funds.
Critics, however, warn that the government is trying to “protect” workers by restricting their financial freedom, which could cause hardships for those between jobs or facing emergencies. Experts suggest a balanced approach — combining digital efficiency and retirement safety with more flexible access to funds when needed.

A Reform With Two Faces
The EPFO reforms of 2025 are well-intentioned, aiming to make India’s provident fund system safer, digital, and globally competitive. But their real-world success will depend on how smoothly they are implemented — and whether the system remains fair to those who depend on their PF money the most. While the new EPFO rules may secure the future, many workers fear they could make the present a little harder.

[Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the editorial stance of this publication.]