EPS withdrawals being tightened to reduce mounting deficit

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New Delhi, Oct 6: given to workers who withdraw from the scheme before completing ten years of service. “Earlier, we used to give 10-11% returns on premature withdrawals of EPS. It was actually profitable to withdraw from the scheme and rejoin with a new account, especially given the higher mobility seen in the labour market over the last decade,” a senior EPFO official explains. Now those who exit early from the scheme will get only a 6% return on their EPS savings.

The EPS 1995 is entirely funded by the employer’s share of PF contributions and a central government subsidy. The EPF contributions amount to 24% of a workers’ salary– with both employer and employee contributing an equal 12%. From the employer’s share, 8.33% of the salary is deducted towards the pension scheme. The Centre makes a contribution of 1.16% of salary towards the scheme — the exchequer’s liability on this account has risen from Rs 600 crore in 2004-05 to Rs 1340 crore in 2006-07.