The Indian government is gearing up to introduce a new pension scheme aimed at enhancing retirement security for millions of workers across the country. Dubbed EPFO 3.0, this initiative will particularly benefit those currently outside the Employee Pension Scheme (EPS), including gig workers and employees from the informal sector.
According to officials, the proposed plan targets gig workers such as delivery personnel and drivers, private sector employees earning over ₹15,000 a month, and others in similar situations. The revamped scheme will integrate with EPFO’s digital platform, improving service speed through core banking solutions.
How will it work? Each member will have an individual pension account on the digital platform. Contributions from employees, employers, and the government will be pooled together and invested in secure long-term government schemes. Upon reaching 60 years of age, members can convert their accumulated funds into monthly pensions based on prevailing interest rates.
There’s more flexibility too: when members turn 55, they’ll have options on how to utilize their savings. They can choose to transition their entire corpus into pensions or withdraw monthly amounts via a systematic withdrawal plan (SWP) tailored to their needs.
A smart digital dashboard will provide insights into fund accumulation and estimated pension benefits by retirement age. This scheme differs from the National Pension System (NPS) by allowing employees greater freedom in accessing funds according to personal needs.
Additionally, there are plans for a ‘Family Benefit Fund’ intended to support families financially after a member’s passing. Currently under consideration, this proposal could positively impact around 41.8 crore workers in India’s informal sector who lack any regular pension arrangement.