The day you change jobs: four accounts, four different clocks

The last working day is a Friday, the new job starts six weeks later, and there is a portal with a balance of ₹4.6 lakh on it and a button marked withdraw. Six weeks with no salary is a genuine cash problem, the money is unambiguously yours, and pressing the button is a perfectly rational-looking response to it. What the portal does not display is that the balance is only half of what the account holds. The other half is a count of years — and depending on which button is pressed, that count either follows you to the new employer or goes back to zero while the money arrives in your bank, feeling like a win.

Four accounts, and what each one counts

Why the years are worth more than the interest

The accumulated balance in a recognised provident fund is exempt from tax where the employee has rendered continuous service of five years or more — and where a balance has been transferred in from a previous employer, that earlier service is counted towards the five. That is the mechanism, and everything else about job changes follows from it. Withdraw before the five years and the withdrawal becomes taxable in a fairly unpleasant way: the employer's contributions and the interest are brought to tax, the deductions you claimed on your own contributions over the years are effectively reversed, and tax is deducted at source above a threshold before the money reaches you. There is a carve-out worth knowing, because it is real and it applies at the worst moments: the charge does not bite where the service ended for reasons outside the employee's control — ill health, the employer discontinuing its business, and the like.

The pension count, which nobody watches

Part of the provident fund deduction goes to the pension scheme rather than into the accumulating balance, and that part has its own service count with its own threshold: a monthly pension requires a minimum number of years of eligible service — ten, at the time of writing — and below that only a withdrawal benefit is payable. Service with different employers is added together only if it is carried forward at each change. That happens automatically enough when the fund is transferred, and where there is a gap between jobs the instrument for preserving it is a scheme certificate, which records the service already rendered so that it can be joined to the next stint. Take the small withdrawal benefit at each change instead, and the count returns to zero each time. It is entirely possible to work for thirty years across five employers, withdraw at every change because the amount looked trivial, and reach fifty-eight with no pension entitlement whatever.

• File the transfer once the new member identity is active, not on your last day at the old job — the receiving account has to exist for the balance to go into.
• Check that there is one UAN and not two. A new employer filing with a different spelling of your name or a different date of birth can generate a second one, which then has to be merged. It is a common problem and it is far easier to fix in the first month than in the tenth year.
• Verify the service history after the transfer completes, rather than assuming it. The transfer of money and the joining of the service period are the same operation, and the passbook is where you confirm both happened.
• An old account left behind is not lost, but it decays. Every year that passes makes the eventual claim harder as names, dates of birth and bank details drift apart across two employers' records. And the treatment of interest credited after you stop contributing is not the same as while you were contributing — a point to check at the time rather than to assume.
• The employer's health cover ends on the last working day, not at the end of the month and usually with no reminder. That is the trigger for the conversation in the previous lesson, and it has to be had before the last day rather than after it.