Change in job is one of the biggest career milestones but when leaving, workers often do one costly thing: they withdraw their EPF balance instead of transferring it to their new job. You withdraw your PF even though it may look like it’s a pretty easy way to get your money and financial experts recommend transferring your PF to maintain long-term retirement savings.
The Employees' Provident Fund Organisation (EPFO) allows salaried employees to transfer their EPF account seamlessly when changing jobs. We have made transfer easy with the introduction of the Universal Account Number (UAN) and employees still have a single EPF account throughout their careers.
Why should you transfer PF not withdraw it
The biggest benefit of transferring your PF is that your retirement savings grow organically. The EPF earns annual interest through the EPFO and your money is invested in and you get the benefit of compounding over time.
Another key benefit is the continuity of service history. Your total years of EPF service are key in deciding your pension benefit under the Employees’ Pension Scheme (EPS). Frequent withdrawals can disrupt this service history and thus reduce future pension benefits.
Tax is also important. If an employee withdraws the PF balance before five continuous years of eligible service, that would be taxable under certain circumstances. However, if they are transferring the EPF account to a new employer, service continuity will continue and they will avoid unnecessary tax liabilities.
Simple Online Transfer Process
Employees can transfer their PF account online with the EPFO member portal through their Universal Account Number (UAN). Before starting to transfer, employees should check that their Aadhaar, PAN, bank account, and mobile number are linked with the UAN.
The transfer request can be made online, verified by the registered employer or Aadhaar-based authentication, and tracked digitally until the transfer has been completed. In most cases, the process is completed without the need for physical paperwork.
In what period of time should you withdraw PF
Financial planners generally recommend that you withdraw your EPF only under special circumstances like retirement, long-term unemployment, or for approved purposes buying a house, higher education, medical emergencies, etc. or paying your home loan as per EPFO.
Retirement savings can reduce the financial cushion in the later years because they will be used for routine expenses after changing jobs. It's not a good long-term investment unless there is a financial need for the money to be invested.
A Better Decision for Your Future
Changing jobs shouldn’t mean resetting your retirement savings. When your EPF account moves from one job to another, employees can continue to earn interest, keep pension eligibility, keep tax benefits, and build a bigger retirement corpus.
With digital services now being easy to transfer, keeping your EPF savings has never been easier. As career mobility becomes more prevalent across sectors, you will be able to make sound financial choices now that will make a big difference in the future and that will really help you in the long run.
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