Do you know how does EPF earn revenue on the investments made by you? Well, the major portion of the corpus is invested in the debt funds but a small portion of the funds are invested in the Exchange Traded Funds as well. This helps the department in earning higher returns and hence they are able to maintain the higher interest rates on EPF. The sad part is that the benefits of the investments under ETFs are not passed on to the EPF members and this is all set to change.
So what is changing?
As per the update, your EPF account will be split into two parts. One of the parts would be the benefits you receive on from the debt fund which is basically the interest and the second part would be the equity-linked provident fund. This equity-linked provident fund would show you the units allocated to you for the ETF and you will also be able to track the gains and the NAV of the unit.
Rest everything remains the same. You will be able to transfer the funds to the new employer just like you do it now but during the withdrawal, you will have an option to withdraw from a single account.
Are there are Benefits of New System?
The major benefit of the new system would be that the benefits would be passed on to you and the benefits would be the higher return. Until now, you are not getting the benefits but this is soon going to change.
What could be the potential drawback of the new System?
The system could bring a disadvantage for the people who have a lower income or who are not risk takers as they would be susceptible to the market volatility which they may not like.
This system is going to be implemented soon and as of now, the confirmed date is not out yet. EPFO is still working on the system so as to offer a better experience to the end user.