EPFO 3.0: Centre Reportedly Working on New Pension Scheme for Formal and Unorganised Workers

New Pension Scheme Under EPFO 3.0

According to media reports, the government is working on a contributory pension scheme under the EPFO 3.0 framework that could bring retirement benefits to millions of workers currently not covered by the existing Employees' Pension Scheme (EPS).

The proposed scheme is expected to cover:

• Workers in the organised sector who are outside EPS coverage.

• Unorganised sector workers.

• Gig and platform workers.

• Self-employed individuals.

How the Proposed Scheme Could Work

As reported, the proposed framework includes a Target Retirement Sum (TRS) concept.

Under this model:

• Workers would make regular contributions throughout their working years.

• The accumulated retirement corpus would be invested primarily in government-backed securities.

• At the age of 60, the Target Retirement Sum would be converted into a monthly pension based on prevailing annuity and interest rates.

Flexible Contributions

Reports suggest the scheme may feature:

• Flexible contributions linked to earnings.

• Contributions from employees and, where applicable, employers.

• Government support for eligible unorganised-sector workers.

• Periodic revisions to account for inflation and changing retirement needs.

How It Differs from Existing Schemes

Unlike the market-linked National Pension System (NPS), the proposed EPFO 3.0 pension model is reported to focus on providing a more predictable retirement income through a target retirement corpus. However, the scheme is still under development and its final design has not been officially announced.

No Official Rollout Yet

The proposal has not yet been formally launched. While the government has confirmed that EPFO 3.0 is primarily a digital transformation initiative for EPFO services, the broader universal pension proposal remains under consideration and details may change before any official implementation.