The Employees' Provident Fund Organisation (EPFO) manages provident fund as a long-term savings scheme designed to provide financial security after retirement. According to reports from NDTV Profit, this corpus acts as a safety net during emergencies such as unemployment, illness or retirement, helping salaried employees build a corpus through monthly contributions from their salaries, which is also matched by the employer. The entire PF process is automatic for employees as most of its process is completed by the employer, making it easy to lose track of the PF corpus, particularly when switching jobs.
When employees switch jobs, the Universal Account Number (UAN) becomes essential for managing multiple PF accounts. As reported by NDTV Profit, UAN acts as a single umbrella for all PF accounts linked to different employers, helping to connect multiple MIDs to one member. The UAN provides services like an updated PF passbook, UAN card, and SMS alerts for contributions, allowing linking of past accounts and enabling automatic transfer requests when changing jobs. This ensures better tracking and management of the PF corpus when an employee starts a new job.
Not transferring provident funds can result in significant complications for employees, according to NDTV Profit reports. Separate accounts can result in employees not qualifying for the threshold years of service needed for many benefits. For instance, if the total service is more than 5 years, TDS is not charged on PF withdrawal, but without transferring PF with the current employer, employees can lose these benefits and may be liable for additional taxes. Additionally, without transfer of PF, employees can lose on the benefits of compounding, as EPFO currently offers 8.25% annual returns on PF contributions. Separate member IDs can result in lower compounding effect, thus reducing the overall value of the corpus.
An EPFO account becomes inoperative when no contributions have been credited to it for 36 consecutive months, as reported by NDTV Profit. Without transferring the PF, employees may end up losing the compounding benefits in their previous accounts after the 3-year period, resulting in lower final corpus value upon retirement. Clubbing all PF accounts can also help members qualify for pensionary and insurance benefits of the EPFO, with a service of more than 10 years making the member eligible for pensionary benefits. That is why transferring PF with the latest employer is necessary to ensure that the past services do not get lapsed.
According to NDTV Profit analysis, keeping your account updated will ensure seamless access to all EPFO benefits and help you avoid unnecessary paperwork when claiming funds after retirement. If a member has multiple PF Member IDs (MIDs) and the balances are not transferred to the latest MID, it is important to consolidate them into the current account using the Universal Account Number system. This ensures better management of the PF corpus and helps maintain eligibility for various EPFO benefits throughout an employee's career. Keeping a track of one's provident fund is an important responsibility of all salaried employees, as it offers a critical financial safety net that encourages disciplined saving habits and provides a dignified lifestyle during old age.
