The Centre is reportedly working on a new contributory pension scheme under its proposed EPFO 3.0 reforms, aiming to provide broader retirement security for millions of workers across India. If implemented, the scheme could extend pension coverage beyond the existing Employees’ Pension Scheme (EPS) to include formal sector employees, gig workers, platform workers, unorganised labourers, and higher-income earners.
According to a report by The Indian Express, the proposed pension model is designed to offer greater flexibility, personalised retirement planning, and improved long-term financial security.
New Pension Scheme to Expand Retirement Coverage
Unlike the current EPS, the proposed scheme will reportedly follow a defined contribution model, where each member accumulates retirement savings in an individual pension account.
Contributions would be invested in long-term government-backed securities, with annual interest credited to the account. Once a member reaches the age of 60, the accumulated corpus could be converted into a regular pension based on prevailing annuity and interest rates.
The initiative is expected to significantly widen India’s social security net by bringing millions of workers currently outside the EPS framework under a structured retirement savings system.
Target Retirement Sum (TRS): A Personalized Pension Goal
One of the key features being considered is the introduction of a Target Retirement Sum (TRS).
Under this approach, every subscriber would have a dedicated pension account, and the system would calculate the retirement corpus required to achieve the pension amount selected by the individual.
Members would also receive access to a personalised dashboard displaying:
- Total contributions
- Current retirement corpus
- Progress towards the Target Retirement Sum
- Estimated contributions needed to reach retirement goals
The platform is expected to allow users to modify their retirement targets and contribution plans as their financial circumstances change.
Multiple Sources Can Contribute to Pension Savings
The proposed pension model goes beyond traditional employer-employee contributions.
According to the report, contributions may also come from:
- Government co-contributions for lower-income workers
- Gig economy aggregators and digital platforms
- Corporate Social Responsibility (CSR) funds
- Non-governmental organisations (NGOs)
- Donor agencies and other approved contributors
This structure aims to make retirement savings more accessible for workers with irregular income patterns, particularly those in the gig economy.
One UAN for Multiple Employers
As part of the EPFO 3.0 reforms, authorities are reportedly planning a one-to-many Universal Account Number (UAN) system.
Under this arrangement, a single UAN could be linked to multiple employers or digital platforms simultaneously.
This would allow gig workers and freelancers earning from different sources to monitor all their provident fund and pension contributions through one unified account, simplifying retirement savings management.
More Flexible Than the National Pension System (NPS)
The proposed pension scheme is expected to offer significantly greater flexibility than the existing National Pension System (NPS).
Instead of requiring complete annuitisation after retirement, members may be able to choose how they access their retirement corpus from the age of 55.
Potential options include:
- Converting the corpus into a regular annuity
- Opting for a systematic withdrawal plan
- Receiving only the interest earned while preserving the principal amount
- Withdrawing a portion of the principal for higher monthly pension payments
Subscribers may also have the flexibility to modify withdrawal amounts based on changing financial needs during retirement.
Additionally, the system is expected to provide retirement planning simulations based on factors such as age, expected retirement date, contribution frequency, corpus value, and inflation assumptions.
Family Pension and Survivor Benefits
The proposal also includes plans to strengthen financial protection for families.
A pooled Family Benefit Fund, managed using actuarial principles, may provide survivor benefits for:
- Spouses
- Children
- Orphaned dependents
The government is also reportedly exploring the possibility of allowing members of EPF, GPF, and other provident fund schemes to transfer their existing balances into the new pension framework, helping individuals build a larger retirement corpus.
Global Models Under Review
While designing the new pension framework, EPFO is reportedly studying retirement systems in countries such as Singapore to adopt international best practices.
The proposed reforms also align with the Code on Social Security, which seeks to extend social security benefits to gig workers and platform employees—segments that have largely remained outside traditional pension coverage.
Rollout Timeline Yet to Be Announced
Although the proposal is being actively considered, the Ministry of Labour and Employment has not yet finalised the implementing agency or announced an official launch date.
If approved, the EPFO 3.0 pension reforms could represent one of India’s most significant social security initiatives, offering flexible retirement planning and wider pension coverage for workers across both the organised and unorganised sectors.