Mumbai: Switching jobs is exciting, but here’s a pitfall many private sector workers fall into: rushing to pull out their Employees’ Provident Fund (EPF) savings.
Financial experts warn that this knee-jerk move might feel like a quick cash boost, but it can derail your retirement plans and even invite hefty tax hits. Instead, they urge, opt for a seamless transfer to your new employer’s account to let that nest egg grow through the magic of compounding.
For millions in India’s bustling corporate world, EPF stands as a cornerstone of retirement security. Each month, 12 per cent of your basic salary plus dearness allowance gets tucked away into this fund, matched equally by your employer. Over time, this pot swells thanks to compound interest – and for the financial year 2024-25, it’s earning a solid 8.25 per cent, outshining many other safe investment avenues.
Yet, job hops often trigger a temptation to cash out. “It’s a common blunder,” says a Mumbai-based financial planner who’s seen it all. “People think, ‘I need the money now,’ but they forget how EPF builds wealth quietly over decades.”
Withdrawing early not only halts that growth but could slap you with taxes if done before five years of continuous service – unless you’re transferring, that is.
The smarter play? Transfer your EPF balance to the new job. The Employees’ Provident Fund Organisation (EPFO) has made this a breeze in the digital age, sparing you those endless office queues. If you’ve started working after September 2014 and your basic pay dips below Rs 15,000, you might also qualify for the Employee Pension Scheme (EPS), adding another layer of post-retirement perks.
Here’s how to get it done without a hitch. First, keep your salary slips handy – they’ll help verify your basic pay and contribution history. Log into the EPFO portal with your Universal Account Number (UAN) and password to peek at your service record and ensure everything’s up to date.
Experts recommend kicking off the transfer within six months of leaving your old gig to avoid glitches down the line. Head to the ‘Online Services’ tab, select ‘One Member – One EPF Account (Transfer Request)’, and verify your details. Punch in info about your old and new employers, then choose who’ll attest your claim – the previous boss or the current one.
Hit ‘Get OTP’, enter the code, and submit. You’ll snag a tracking ID and a peek at your PF details. Print Form 13, sign it, and hand it over to your employer within 10 days. Once both the employer and EPFO give the nod – usually in two to three weeks – you’ll get an SMS alert. Voila, your funds are safely migrated, continuing to earn that juicy interest.
Sticking with EPF isn’t just about the money; it’s about building financial discipline. Regular contributions ensure a robust safety net when you hang up your boots. By resisting the urge to withdraw and choosing transfers instead, you’re setting yourself up for a worry-free golden years.
As India’s job market stays fluid, with folks switching roles more frequently, safeguarding your EPF could be the difference between a comfortable retirement and scraping by. So next time a better offer comes knocking, remember: transfer, don’t terminate your fund.