In our country, most of the people are not serious about retirement fund. Most of the working people do not even talk about the pension plan, because they neither know about it nor do they have complete information about it. You can call it a problem or compulsion of educated people, but this is the truth. Most carelessness regarding retirement fund and pension is seen among private sector employees.
Actually, the amount of PF (Provident Fund) is a big support for those working in the private sector. A small amount added every month turns into a big fund. For those doing private jobs, PF money is a lifeline in difficult times. If they lose their job, the PF money helps them overcome financial challenges. If someone in the family is ill, it is better to withdraw money from the PF account instead of taking a loan for treatment. If there is shortage of money for children’s education or marriage, then they withdraw money from their PF account. If they want to buy a house, they withdraw the savings deposited in their PF account over the years. In India, for most middle class families, PF money is currently being used primarily for these purposes. It is worth noting that most of the people in the country work in the private sector.
Major changes have been planned for PF
The main reason for discussing the PF amount today is the new initiative of the government. The government says that in a few months you will be able to withdraw PF funds immediately, and this process will become easy. EPFO accounts will be linked to UPI and ATM. It is being claimed that all this will be completed by March 2026. Simplifying the process of withdrawing PF is a good thing, because people still face difficulties in withdrawing their PF amount. The government says that the system for withdrawing PF funds will be similar to the way people withdraw money from their bank accounts, and work on it is going on rapidly.
This means that in the digital age, it will become very easy to withdraw money from PF account, but it will also have a big side effect. People’s savings are going to be in danger. Just think – if you can withdraw funds from your PF account whenever you want, then how many people will save their money in their PF account for years? People will run towards ATM even for small needs. The biggest question is that for how long will the PF amount remain in the account? PF fund currently acts as a lifeline for major events like buying a house, illness, education or marriage, but with the facility of easy withdrawal, most people may not be able to resist this temptation for long.
So, what are the options for saving?
As soon as the facility of instant PF withdrawal is implemented, anyone will feel comfortable in withdrawing their PF amount. Even today people do not hesitate in taking loans for fun and entertainment; For them, PF amount will seem to be the easiest option. This will be true whether one has Rs 10 lakh or Rs 10,000 in one’s PF account. People will start withdrawing money from their PF account without any hesitation for things like buying mobile phones and shopping. This habit can become so strong that like their salary, as soon as the amount is deposited in their PF account every month, they will withdraw it after a few days.
People in India are already not much aware about retirement funds. Even though today people are not able to withdraw PF funds easily due to the difficult withdrawal process, still a lot of money is being deposited in their accounts. With the facility of instant PF fund withdrawal, even if one works for 20 years, most people will have only a few rupees left as savings in their EPFO account, as they would have already withdrawn PF money from time to time using UPI and ATM.
Now let’s look at some figures that will show you what the impact on savings is going to be. As per the rules, both the employee and the company contribute 12% of the employee’s basic salary to PF. A part of it goes to the pension fund (EPS). In the financial year 2023-24, EPFO had 7.37 crore members, which means around 8 crore people are connected to EPFO right now. EPFO’s total PF corpus (FY25) is around Rs 25 lakh crore, making it one of the largest retirement savings funds in India. This amount is increasing year after year. But as soon as the new system is implemented, this amount will start reducing. So where will this money go?
People will not hesitate in taking risks under the guise of PF.
It is possible that people may start investing their PF money in the stock market and mutual funds, because currently the interest rate on PF is 8.25 percent. Mutual funds have the potential to yield higher returns, and people even dream of earning double or triple the interest from the stock market compared to PF. In such a situation, people will not hesitate to take risk by withdrawing money from safe investments. Only time will tell how much more beneficial mutual funds and stock market will be than PF. The truth is that India’s overall gross savings rate is about 31 percent. According to a recent survey by SEBI, only 10% of Indian households invest in financial products like mutual funds, stocks and bonds. In urban areas this figure is 15%, while in rural areas it is only 6%. Although the inclination towards saving has increased among the younger generation, they are increasingly attracted towards the risky stock market.
Government data shows that about 69% of Indian households still prefer to keep their money in bank deposits or fixed deposits (FD). According to a report, about 40% of urban residents have not yet made any investment for retirement planning. The situation is even worse in rural areas. This means that more than half of the country’s population does not have any plan for retirement fund. Talking about pension, the population of the country is more than 140 crores, but the pension coverage is maximum only up to 2 percent of the population. Atal Pension Yojana (APY) is one such scheme, which has about 8.34 crore subscribers, but it provides a maximum monthly pension of only Rs 5,000. Those who want to take advantage of this scheme will have to wait for a long time. In such a situation, PF, which is the only support in difficult times, will also stop being available after a few months.