The Central Board of Trustees of Employees Provident Fund Organisation on Tuesday approved a scheme allowing subscribers to withdraw up to 90 per cent of the accruals to invest in Varishtha Pension Bima Yojana, rolled out by Prime Minister Atal Bihari Vajpayee.

"The proposal to permit withdrawal of up to 90 per cent of the amount standing at a member's (completed 55 years) EPF credit to be transferred to the LIC for investment in Varishtha Pension Bima Yojana, is approved," Bharatiya Mazdoor Sangh president Hasubhai Dave said after the meeting.

LIC's Varishtha Pension Bima Yojna offers an attractive 9.0 per cent return to senior citizens above 55 years of age.

The LIC scheme could be bought for a minimum Rs 33,335 for getting a monthly pension of Rs 250 while the maximum investment can be up to Rs 2,77,490 for getting a pension of Rs 2,000 a month.

The scheme provides for pension during the life time of the pensioner. In the event of death, the purchase price will be returned to the nominee of the pensioner.

The government will subsidise LIC annually for the difference between the actual yield on its investment and the assured return of 9.0 per cent, it added.

With this approval, separate administrative arrangements would be in place in consultation with LIC for enabling direct transfers to the insurance monolith at a minimal transaction cost, EPFO sources said.

The move to allow this was to check 'frittering away' of lumpsum amount taken from the EPFO after the retirement, they added.

Appropriate modifications would be carried out in Para 68NN of EPF Act whereby the Commissioner or any designated person could authorise an option from a member, who is 55 years or older, to withdraw up to 90 per cent of the amount standing at his credit and transfer it to LIC's Varishtha Pension Bima Yojana, an EPFO official said.

Dave said the desirability of making the opportunity to higher monthly returns as envisaged in the LIC scheme has been expected in the context of EPF subscribers.

With this, life-time savings of the worker would become  pension assets, which would not be in the form of annuity and yet guarantee a monthly return, he said.

At present, EPFO makes a lumpsum payment to subscribers on retirement in addition to early withdrawals in certain specific circumstances while the worker is in service.

Sources, however, said the experience showed that the final settlement of PF accounts were usually very low as the members tend to depend on early withdrawals for meeting the current needs.

There were also instances of subscribers opting for final settlement in the event of change in the employer, they said, adding, "This problem could largely be addressed when the unique Social Security Number is extended across the country."

But both these withdrawals had led to dilution of the Provident Fund schemes, which were originally envisaged as retirement savings schemes, the sources said.