35 million workers withdraw retirement savings worth Rs 1.25 lakh crore from PF accounts

Since April 1, 2020, more than 35 million workers in the formal sector have withdrawn money from their retirement savings, or provident fund (PF) accounts, indicating the impact of the COVID-19 pandemic on salaried individuals.

35 million people withdrew a combined Rs 1.25 lakh crore from PF accounts, The Economic Times reported citing data from the Employees' Provident Fund Organisation (EPFO). These workers account for more than half of all EPFO subscribers, which is around 60 million. This amount includes settlements against the provident fund, pension, death insurance, and even transfers.

In FY19, the claims settled by the EPFO totaled Rs 81,200 crore between April 1, 2020, and May 12, 2021, 7.2 million of the 35 million workers availed the non-refundable COVID-19 advance totaling Rs 18,500 crore, the report said.

The Centre, in March 2020, permitted EPF subscribers to withdraw 75 per cent of their PF balance or three-month wages, whichever is lower, as a non-refundable advance.

The report said that while the year-on-year withdrawals are at least 10 per cent higher due to retirement exits and job changes, the number is significantly higher due to additional COVID-19 withdrawals.

"Average per capita withdrawals due to Covid hover around Rs 25,000, which means average monthly wage earnings (basic pay + dearness allowance) would be around Rs 8,000-9,000. In other words, it is the unskilled low-paid-wage workers who have taken advantage of withdrawals," KR Shyam Sundar, professor at XLRI, told The Economic Times.

"At the same time, to that extent, their EPF accruals will stand less, and that is something worrying when we think about medium to long-term social security of the workers," he said.

Reference(s): The Economic Times, Money Control