In a bid to make PF accounts portable and increase social security, retirement fund body Employees’ Provident Fund Organisation (EPFO) is planning to introduce a system whereby an employee’s PF account will automatically be transferred in case he changes his job. This system is likely to be introduced from next month, according to a TOI report.
Experts say that the new rule which is coming up for PF transfer with change in jobs will be highly helpful. “Previously there were many issues while changing of jobs. An employee had to necessarily open a new PF account with the company. Then a transfer application had to be submitted to the new company to transfer the previous balance in the new account. This was a hassle and many employees used to avoid the process especially when job switching was more frequent. As a result either they used to withdrew the money from the old account or leave it as it is,” says Jitendra P S Solanki, CFP & Planner For Special Needs Member Families.
Here we are taking a look at how the new system will be different from the old one and how EPF subscribers will get benefited once this new system gets implemented:
Easy Transfer of PF Account: The purpose of a PF account is primarily to accumulate funds for retirement provision or any other long-term goals. “Till now while switching jobs, due to the hassles involved in transfer of a PF account to the new employer, employees usually used to opt for closing the account and withdrawing the money. Now with the introduction of the new system it will be easier to transfer the account and hopefully people will be able to accumulate significant funds for their retirement or long-term goals,” says Atul Surana, Certified Financial Planner, Catalyst Financial Planning.
Better for Social Security: With the automatic transfer of one’s PF account, one will not be required to close the old account due to the hassles of transferring the account to the new employer. This will be good from the viewpoint of social security as one’s fund will automatically get transferred to the new account and there won’t be any need to withdraw it. Also, employees will be able to continue their contributions till they retire from job.
Link with Aadhaar: Aadhaar has now been made compulsory for opening a PF account. This will help avoid any fraudulent withdrawal of money from one’s PF account. Also, linking one’s Aadhaar number to one’s PF account will help one get one’s PF account transferred in case of a job change without any application.
Help Trace Old Accounts: Earlier many PF accounts used to become dormant as many employees were not claiming them due to the hassles involved. Some of these issues were addressed when EPFO launched the UID number, but still for many people tracing the old PF accounts is difficult. “Even now though UID is generated, it gets linked mainly with new accounts while old accounts are untraceable. There is no way for an employee to trace an old PF account, if the number gets lost. Now linking the PF accounts with Aadhaar and transferring the accounts without manual intervention will provide a major relief especially when an employee switches job,” says Solanki.