Employees Provident Fund Act, 1991
The EPF Act 1991 requires employees and their employers to contribute towards their retirement savings, and allows workers to withdraw these savings at retirement or for special purposes before then. The EPF is intended to help employees from the private sector save a fraction of their salary in a lifetime banking scheme, to be used primarily as a retirement fund but also in the event that the employee is temporarily or no longer fit to work. The EPF also provides a framework for employers to meet legal and moral obligations to their employees. While in savings, a member’s EPF savings may be used as investments for companies deemed profitable and permissible by the organisation, from which dividends are banked to respective members’ accounts. Alternately, members may use their EPF savings in their own investments, although such activities are not covered by the EFP and the members are to bear any losses made.
The EPF declares an annual dividend on funds on deposit which has varied over time, depending on investment results.
Legally, the EPF is only obligated to provide 2.5% dividends (as per Section 27 of the Employees Provident Fund Act 1991)
As a retirement plan, money accumulated in an EPF savings can only be withdrawn when members reach 50 years old, during which they may withdraw only 30% of their EPF; members who are 55 years old or older may withdraw all of their EPF. When a member dies beforehand, the EPF fund is withdrawn in favour of a nominated individual. Withdrawals are also possible when a member permanently emigrates, becomes disabled, or requires essential medical treatment. Members above 55 years old can choose not to withdraw EPF savings immediately and withdraw only later, and, under existing guidelines, employers may continue to contribute 12% of the members’ salaries at their own discretion.