PF Account: Not Just Savings, But Your Path to Pension—Know These Important Rules

For salaried employees, contributions to the Provident Fund (PF) are a routine part of monthly income deductions. But if you think PF is just a savings tool, think again. It’s also a gateway to guaranteed pension benefits after retirement—provided you follow certain key rules.

While many are aware that 12% of their basic salary is deducted each month for PF, fewer people realize that a portion of the employer’s contribution goes toward the Employee Pension Scheme (EPS). This EPS component is what ensures a fixed pension after you retire. However, withdrawing your full PF amount prematurely can disqualify you from this lifelong pension benefit.

Here’s why it's crucial to understand the rules tied to your PF and how it can help you build a secure post-retirement future.

How PF and EPS Contributions Work

Every month:

• 12% of your basic salary is contributed by you towards PF.

• Your employer also contributes 12%, but not all of it goes to your PF account.

• Out of the employer’s contribution, 8.33% of ₹15,000 (i.e., ₹1,250 per month) is diverted into EPS.

• This EPS amount builds your pension eligibility over time.

So essentially, while your PF account grows as a lump-sum savings, your EPS builds a monthly pension income for your retirement years.

Why Withdrawing PF Early Can Be Risky

One of the biggest mistakes many employees make is withdrawing the entire PF balance after switching jobs or before retirement. While it may seem like a quick way to get access to cash, it can permanently deprive you of pension benefits under EPS.

As per EPFO rules:

• To receive a pension under EPS, you must complete at least 10 years of service.

• If you withdraw your PF before completing this, you also lose out on the pension entitlement—even if you’ve contributed to EPS during that time.

Therefore, unless it’s an emergency, it’s advisable to avoid premature withdrawals and allow your account to grow until retirement.

Key Points to Remember for Pension Eligibility

Minimum 10 Years of Service
EPS pension becomes applicable only after completing 10 years of continuous service.

Age of Retirement
Pension under EPS is typically disbursed from age 58 onwards. You can also opt for early pension from age 50, but with reduced benefits.

Don’t Withdraw EPS Amount
Many people are unaware that when they withdraw the full PF, they might unknowingly take out their EPS corpus too—making them ineligible for pension.

Check UAN Portal Regularly
Ensure your PF and EPS contributions are being deposited properly by logging in to your UAN (Universal Account Number) portal.

Use Form 10C and 10D Wisely

• Form 10C: Used for withdrawing EPS (if under 10 years of service).

• Form 10D: Used to apply for monthly pension (after 10 years of service).

Tips for Maximizing PF and EPS Benefits

• Avoid Job Hopping Too Frequently
  Frequent changes may lead to fragmented service periods, which can affect EPS eligibility.

• Transfer PF When Switching Jobs
  Always transfer your existing PF account instead of withdrawing it when you join a new company.

• Keep KYC Updated
  Ensure your Aadhaar, PAN, and bank details are up-to-date in the EPFO portal to avoid issues during withdrawal or pension claim.

Conclusion

Your PF account is more than just a savings scheme—it’s a critical tool for long-term financial planning. By understanding how EPS works and by resisting the urge to withdraw early, you ensure a steady pension income post-retirement. In a time when personal financial security is more important than ever, preserving your EPS contribution is an investment in your future stability.