New EPF rules spark outrage: Opposition slams 25% lock-in and 12-month wait; govt clarifies

The Employees’ Provident Fund Organisation (EPFO) has approved a sweeping set of rule changes aimed at improving long-term retirement savings, but the move has triggered a storm of political controversy. Opposition parties have accused the government of “punishing salaried employees” with what they call “draconian” reforms, while the Labour Ministry insists the new framework strengthens social security for millions of workers.

The reforms, cleared by the Central Board of Trustees (CBT) under Labour and Employment Minister Mansukh Mandaviya, introduce three major changes: a mandatory 25% minimum balance that must remain untouched in every EPF account until retirement, an extension of the withdrawal waiting period to 12 months after job loss (from two months earlier), and a 36-month waiting period for pension fund withdrawals under the Employees’ Pension Scheme (EPS).

Under the new provisions, EPF subscribers can now withdraw up to 100% of their eligible balance, provided that one-fourth of their total corpus remains locked in. Officials said the change would ensure members continue earning the 8.25% annual interest offered by EPFO, allowing compounding benefits to build a stronger retirement corpus over time.

25% minimum EPF balance rule

While the 25% minimum EPF balance rule is designed to safeguard retirement savings, it may pose challenges in times of financial distress. For instance, individuals who lose their jobs might urgently need access to their full corpus but will now be restricted from withdrawing it entirely.

Criticising the policy, Trinamool Congress MP Saket Gokhale argued that the new rule effectively locks away a quarter of a worker’s hard-earned savings until retirement. “Imagine losing your job but still having bills and EMIs to pay. The Modi government won’t let you withdraw your own money for a full year — and even then, you can access only 75%, and only if you remain unemployed,” Gokhale wrote on X (formerly Twitter).

Extension of waiting period

Another key change under the new EPF rules is the extension of the waiting period for final withdrawals. Members must now remain unemployed for 12 months, instead of 2 months, to make a premature full withdrawal from their EPF account. Similarly, for pension withdrawals under the EPS 95 scheme, the waiting period has been increased from 2 months to 36 months.

Criticising the move, Saket Gokhale said it unfairly restricts workers’ access to their own savings. “Earlier, on losing your job, you could withdraw your EPF balance after 2 months. That minimum period has now shockingly been increased to 1 year. To withdraw your own money, you now need to be unemployed for a full year,” he wrote on X (formerly Twitter).

Retirement security

According to CBT officials, the decision aims to protect long-term savings and discourage premature withdrawals that deplete retirement funds. The CBT has also simplified the withdrawal framework by merging 13 separate provisions into three categories — essential needs (such as illness, education, and marriage), housing needs, and special circumstances (like disability or calamity-related distress).

Experts said members can now access their full eligible corpus for genuine needs while still retaining a protected portion for retirement. The simplification will reduce paperwork, unify eligibility criteria, and minimise rejections arising from complex past rules.

Additionally, the number of partial withdrawals for education and marriage has been expanded — from three combined withdrawals earlier to 10 for education and five for marriage. The enhancement would help members handle long-term education expenses and multiple family weddings more conveniently.

Opposition’s criticism

However, opposition leaders see the move as an unjust blow to the salaried class. Congress MP Manickam Tagore accused the government of “depriving workers of their own savings,” calling it “economic cruelty.” He claimed the new policy forces jobless citizens to wait a full year to access funds, at a time when they most need liquidity to pay bills and EMIs.

Gokhale described the policy as “open theft of salaried people’s own money,” noting that 25% of contributions would remain inaccessible until retirement. “Imagine a person who loses their job — they can’t withdraw for a year, and even then, they can access only 75%. How are people supposed to survive?” he asked.

“Earlier, on losing your job, you could withdraw your EPF balance after 2 months of employment. That minimum period has now SHOCKINGLY been increased to 1 YEAR Basically, for withdrawing your OWN money, you need to now be unemployed for a FULL YEAR as opposed to only 2 months,” Gokhale wrote on Twitter.

Gokhale’s comments prompted a response from the Press Information Bureau’s Fact Check unit, which labelled his claims “misleading.” However, independent analysts, including those at Taxonomics, countered that the government’s clarification “failed to address the core concern — restricted liquidity during unemployment.”

Impact on EPF members

For subscribers, the new framework presents both opportunities and challenges. While the 25% lock-in promises higher corpus growth through compounding, it also limits emergency access to funds. Analysts believe this move will particularly affect those facing prolonged unemployment or unexpected financial crises.

Experts said while the policy promotes financial discipline, it may hurt short-term liquidity for laid-off employees. The key will be how EPFO defines ‘eligible balance’ and whether genuine hardship cases get exceptions.

The EPFO defends the decision as a step toward “ease of living” and financial security, emphasizing that premature withdrawals have undermined retirement readiness for decades. Still, with political criticism mounting and worker unions expressing unease, the Labour Ministry may face pressure to review some of the new provisions in the coming months.

Key takeaways for EPF subscribers

The EPFO’s new rules offer greater access to savings with built-in safeguards. Members can withdraw up to 75% of their corpus while 25% stays secured for retirement. Full PF withdrawal now requires 12 months of unemployment, and EPS withdrawal 36 months, discouraging early depletion. Withdrawal categories have been simplified from 13 to 3, reducing delays and paperwork. A digital-first system with Passbook Lite, Aadhaar-based transfers, and face authentication streamlines processes. Transfers between jobs are now automatic when UAN and Aadhaar are linked, and claims up to ₹5 lakh are settled faster.

What members should do

Link Aadhaar with UAN, update KYC, retain 25% balance, avoid premature withdrawals, and use the unified EPFO portal or UMANG app for quick access.