Last year there were many changes bought by Employee Provident Fund Organization to ensure the life of subscribers of employee provident fund scheme can become simpler. The first change was the opening of online facility and giving a real time access to the EPF account. Now no more you are dependent on your employer to get your EPF account statement. With a click of a mouse you can view your provident fund details.
The online facility also resolves a major hurdle faced by its subscribers. To transfer one epf account to another epf account it use to take months and there was no whereabouts of the application. Many use to forego the old PF account leaving it unmanaged. With online facility subscribers can now process the transfer easily and can also track their status of applications for PF transfer. Any delayed at employer end can easily be notified to the employer this giving a much needed right to the subscriber. Thus online facility by EPFO was a highly welcome move for their large base of subscribers which is ensuring management of the EPF account more smoothly.
Along with EPFO The Indian Government has also made changes in the EPF Act to bring in more people under this scheme. The sole objective is to provide for stream of regular income to a larger base of low income group people who in general get deprived of their living standard beyond a certain life stage. But some changes in the act impact all EPF subscriber’s.
Let’s review what changes in the EPF Act has been introduced and how it is benefiting the people at large in planning their life requirements –
Minimum Wages Raised
Many people who have a salary above R 6500 were not able to participate in the employee provident fund scheme since this was the income/wages limit for compulsory holding a PF account. Above this limit it was voluntarily so not many organization introduced the benefit for their employees. But this has changed now. With effect from 1st September 2014 the maximum limit of wage/salary for compulsory participating in EPF scheme has been raised to R 15000. This means any Employee/Worker earning up to R 15000 will have to compulsory contribute part of their income towards EPF scheme. For individuals earning above R 15000 the contribution towards EPF remains a voluntary option. In general, 12% of the employee salary (including DA) goes towards EPF contribution and equivalent gets contributed by the employer. The employer contribution is further divided wherein 8.33% goes to the employee pension scheme (EPS), .5% goes to the Employee Deposit Linked Insurance (EDLI), 1.1% to EPF administrative charges and .01% to EDLI administrative charges.
Minimum Pension Increased
The amount of employer contribution going towards Employee Pension Scheme (8.33%) is utilized to pay the subscriber or the family a fixed pension after a vesting age ( 58 yrs) or at death. This contribution is fairly low for low income group as their family is highly dependent on the pension arising from the accumulation. But due to low contribution amount the pension receivable was also too low. This was disappointing for family of deceased especially the widowers. This has changed now wherein the minimum pension under Employee Pension Scheme has been increased to R 1000 p.m. However, to reduce the long term burden on the government for providing fixed pension to even the high income group, employees joining after 1st September 2014 and having salary above R 15000 will not be able to participate in this scheme as their entire employer contribution will go to EPF.
Higher Amount In EPS
From employer contribution 8.33% goes towards EPS scheme. Until 1st Sept 2014 this was subject to the salary/wage limit of R 6500 which bowls down to an amount of R 541. This has also been increased to R 1250 considering the increase in minimum wage to R 15000. But this is also the maximum limit even if your EPS contributions go beyond R 1250. This cap on the contribution is especially for individuals who have joined before 1st September 2014 and having salary above R 15000. So if your salary is R 20000 the EPS contribution will be limited top R 1250 even though the 8.33% contribution tells you the higher amount. For employees joining after 1st September 2014 the scheme is not available at all.
The Benefit In EDLI Has Been Enhanced
Till September 2014 the life insurance coverage to EPF subscribers under EDLI benefit was R 1.5 lakh. This has been increased to R 3 lakh. So on EPF subscriber death the family will get R 3 lakh (A bit more if adhoc benefits are added). This is surely a welcome move which gives a much needed family protection for certain category of employees falling in lower income bracket.
Universal Account Number
Launched in Oct 2014 a Universal Account Number for your EPF account allows you easy portability among your EPF accounts and also smooth transfer of your EPF to your bank account. UAN number is unique to every employee and links all your EPF account which you would have opened through different employers. Once you have received your UAN your new account will get linked to this number thus giving you access to all your EPF account. This also removes hassle of KYC each time you open a new account. The other benefit it will give is transferring your EPF fund to your bank account. As per the procedure for withdrawals or loans you will have to fill up a form and provide finger print to a biometric reader. The funds then will be transferred within an hour which is highly advantageous when you consider taking months for the process.
The EPFO and the government is making EPF access easier. The changes which has taken place and which are in the process augurs well for you. Hopefully more will be added to the EPF subscriber list and with online facilities available keeping yourself aware of your EPF funds is not difficult anymore. It’s wiser now to avail all these facilities and bring in the awareness in your financial planning. But do keep your retirement and tax provisions in mind when withdrawing your EPF.
How has been your experience? Is EPF a great retirement tool?
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