EPFO Doesn't Pay Interest or Pension in These Cases — Know the Rules Before It's Too Late!

The Employees’ Provident Fund Organisation (EPFO) is one of India’s most trusted government-backed retirement savings schemes. It allows salaried employees to build a strong financial cushion throughout their working years. Upon retirement, this fund can be withdrawn either as a lump sum or in the form of monthly pension payouts.

For every salaried individual, the EPF (Employees’ Provident Fund) is more than just a savings plan — it’s a key part of future financial stability. Contributions are made regularly during employment, and the fund grows over time through interest earnings and employer contributions. But what happens if you become unemployed for a long period? Will you still be eligible for EPFO pension benefits? And can you withdraw the money during unemployment?

Let’s break it all down and understand the rules and the fine print.

What Is EPFO and Why Is It Important?

EPFO manages retirement savings for millions of Indian workers. A portion of your monthly salary is deducted and deposited into your EPF account. An equal or partial contribution is also made by your employer. Over time, this amount grows with interest and becomes a substantial retirement corpus.

On retirement at the age of 60, you can either:

• Withdraw the entire amount in one go, or

• Opt for monthly pension payments under the EPS (Employees’ Pension Scheme), which is a part of the overall EPFO framework.

When EPFO May Not Pay Interest or Pension

While the EPF scheme offers numerous benefits, there are specific scenarios where your interest earnings or pension eligibility may be affected. Here’s what you need to know:

1. No Interest After Inactivity for 3 Years

If you remain unemployed for over 36 months (3 years) and do not contribute to your EPF account during that time, the account becomes inactive or dormant. As per EPFO rules:

• No interest is paid on the balance of dormant accounts after 3 years of inactivity.

• This means your money will stop earning returns, reducing the total fund value over time.

2. No Pension Without Minimum Contribution Period

To become eligible for monthly pension benefits under the EPS scheme, you must fulfill the minimum contribution criteria:

• You need to have contributed to the EPS for at least 10 years to qualify for a pension.

• If you fail to meet this requirement, you won’t receive monthly pension benefits, though you can still withdraw the accumulated EPF amount as a lump sum.

3. Withdrawal During Unemployment

The EPFO does allow partial withdrawal from your EPF account under certain conditions like:

• Unemployment for more than one month (you can withdraw up to 75% of your EPF balance),

• After two months, the remaining 25% can also be withdrawn.

However, doing so means you are breaking your retirement savings and may lose out on future interest and compounding benefits.

EPFO Interest Rate Update for FY 2024-25

Good news for account holders: the EPFO has maintained the interest rate at 8.25% for the financial year 2024-25. This is a slight increase from the previous year's rate of 8.15% for 2022-23.

• This makes EPF one of the most attractive risk-free long-term investment options in India.

• The interest is compounded annually, helping your fund grow steadily over time.

Final Words: Stay Active, Stay Eligible

The EPF scheme is a fantastic tool for retirement planning, but to reap its full benefits, it’s important to stay informed and proactive. Remember:

• Keep your account active through regular contributions.

• Understand the pension eligibility rules.

• Avoid withdrawing your savings unless absolutely necessary.

By following the guidelines and being aware of EPFO rules, you can ensure a safe, interest-earning, and pension-secured retirement.