Questions About FPF Withdrawal: Eligibility, Deductions, and Interest Concerns

Hi, I have two queries regarding the FPF (Family Pension Fund) contribution made by the employer to the EPFO:

1) I understand that FPF can be withdrawn only if the employee has completed a minimum of 6 months of service with one organization. What if the service is short of 6 months by 2-3 days? Can FPF be withdrawn then?

2) I was informed by the EPFO office that upon withdrawal of FPF, the employee receives only a certain percentage of the FPF contributed, depending on the extent of service. Does this mean that if my 6-month FPF accumulation is, for example, Rs. 10,000 and I withdraw, I will not receive the full Rs. 10,000 but only a certain percentage of it? If so, what is the reasoning behind this deduction?

3) With the FPF contribution now revised upwards to Rs. 1250 from Rs. 540 previously, it is crucial that it earns some interest. What is the reason behind not providing any interest on FPF contributions?

An early response is requested. I have been following ABBASIT's expert views on PF matters. I also look forward to his opinion on the above.

Thanks,
Nirav

If your service is less than 6 months, it can be transferred to add up with future service. The withdrawal benefit for 1 to 9 years is 1.02, 1.99, 2.98, 3.99, 5.02, 6.07, 7.13, 8.22, and 9.33 respectively multiplied by salary. This means that except for 2, 3, and 4 years, you will earn interest. For clarification on the logic behind this, it is recommended to reach out to EPFO as the scheme is streamlined by them.

Regarding Compliance

The same answer applies as in response number 2.

Regards,
Abbas.P.S

Kindly find the answers to your queries.

1) Eligibility for Pension Withdrawal

An employee can withdraw a pension only if they have served in an organization for a minimum of 6 months. There is no eligibility if the period is less than 6 months. However, it is also necessary that the organization has remitted the pension dues of the employee to the respective PF Office for this period.

2) Calculation of Pension Amount

You are right. The amount of pension that you get on withdrawal depends upon your period of service and not on the monthly contribution. It's a bit difficult to explain the calculation here, but I'll run you through the general fundamental principle behind its calculation. For computing the eligible pension amount (in case of withdrawal), there is a "factor" which the PF Office takes into consideration, and it is multiplied by the EPS wages. However, the factor depends upon the number of months you have completed working in an organization.

Accordingly, there are people who stand at an advantage and there are people who are at a less advantage. In short, your pension amount is not dependent on your contribution once your EPS wages exceed INR 6500 (INR 15000 currently).

3) Dependency on Service Extent

So, the total pension amount is dependent on the extent of service. It is derived through a formula and not on the total contribution made. Hence, there is no rationale behind questioning why there is no interest on it.

Hope I have answered your queries to your satisfaction!

(To avail the maximum benefit of pension through withdrawal, employees who plan to change jobs should leave an organization only after completing 18 months or 30 months or 42 months and so on, adding 12).

Cheers,
A.B.

Dear A.B.,

The difference in table D didn't come to my notice until today. Thank you for updating. However, the second part of your answer is mistaken. It does have something to do with interest rates.

One month EPS contribution is 8.33%, which is equivalent to 1/12. This means for 12 months, the EPS contribution will be one month's salary. In return, EPFO will give 1.02.

Abbas.P.S

Thank you for your valuable input and time. I believe that there are still a few unanswered questions due to the inherent nature of policy-makers. There will be a large group of individuals who may not be informed or opt-out of FPFs (through short-tenured services).

I intend to continue this discussion with additional questions after March 31st when my position will be clearer.

Thank you once again,

Regards,
Nirav

No doubt. But from Table D, we can understand whether we will get more than our contribution or not in general. For 5, 6, 7, 8 & 9 years, our contributions are 5, 6, 7, 8 & 9 times, and withdrawal benefits are 5.02, 6.07, 7.13, 8.22 & 9.33 times respectively.

Abbas.P.S