The Central Government is working on a new contributory pension scheme under the EPFO 3.0 reforms that aims to expand retirement benefits to both organised and unorganised sector workers, including gig and platform workers. The proposed scheme will allow members to build a retirement corpus through contributions from multiple sources before converting it into a pension at retirement.
Under the proposal, contributions will accumulate over time and be invested in long-term government-backed securities, with interest credited annually. At the age of 60, the accumulated Target Retirement Sum (TRS) may be converted into a pension based on prevailing annuity and interest rates.
The scheme is expected to cover existing EPFO members as well as workers currently excluded from the Employees’ Pension Scheme (EPS). It will follow a defined contribution model, allowing contributions from employees, employers, government co-contributions for lower-income workers, aggregators for gig and platform workers, and even CSR or third-party funds.
Members will receive individual pension accounts with personalised dashboards showing total contributions, retirement corpus, and progress towards their chosen TRS. The system will also calculate the contribution amount and frequency required to achieve retirement goals while allowing members to revise their targets over time.
The proposal gives members flexibility from the age of 55 to decide how they want to use their retirement savings. “Till that time, it will operate like PF, you keep on accumulating. At that stage when you are retiring, it converts into an annuity or a systematic withdrawal plan,” an official said.
Unlike the National Pension System (NPS), the proposed plan is expected to offer greater flexibility. Officials said it will be “more flexible, risk free and based on real and not notional returns.” Members will be able to choose higher or lower monthly withdrawals depending on their financial needs, with options designed to support inflation-adjusted retirement income.
The EPFO 3.0 platform will also include pension simulation tools that allow users to estimate retirement income based on age, corpus, interest rate, retirement age and voluntary contributions. Members will be able to compare multiple retirement scenarios before making decisions.
The proposed scheme also includes family and survivor pensions for spouses, children and orphans through a pooled Family Benefit Fund. Existing balances from EPF, GPF and other provident funds may also be transferred into the new pension system.
As part of the broader EPFO 3.0 reforms, the government plans to strengthen digital infrastructure, upgrade the core banking solution and extend social security coverage to around 2.5 crore gig workers and construction workers over the next 5 years. The proposal also supports multiple employer contributions under a single UAN and allows third-party contributions from NGOs, donor organisations, individuals and CSR initiatives.
The Ministry of Labour and Employment is also studying international retirement models, including Singapore’s Central Provident Fund (CPF), while finalising the framework for the proposed pension initiative.
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