EPFO 3.0: The government is set to launch a new pension scheme that will be significantly more inclusive than the existing Employee Pension Scheme (EPS). This new initiative will benefit not just corporate employees, but also those working for companies like Ola, Uber, Swiggy, and others, including high-salaried individuals who are currently not covered by the EPS. This initiative is part of the government’s “EPFO 3.0” reform strategy.
A key feature of this new scheme is the Target Retirement Sum (TRS), which represents the amount of money you can expect to receive upon retirement. Each participant will have their own pension account, allowing you to specify your desired retirement pension. The system will automatically calculate the monthly or yearly contributions needed to achieve your target.
You will be able to see the full calculations in real time
As reported by the Indian Express, tracking your pension will no longer be a hassle. An official mentioned that members will have access to a personalized dashboard. This dashboard will display your accumulated savings, the current status of your funds, and how close you are to reaching your retirement goal. You can also modify your goal at any time to better fit your circumstances.
The pension fund can receive contributions from various sources.
Traditionally, only the employee and employer contribute to the Provident Fund (PF), but under the new scheme, funds can come from multiple sources. The report indicates that the government may also contribute to the accounts of low-income employees. For gig workers, the companies that hire them will also make contributions. Additionally, third parties such as CSR funds, NGOs, and charitable organizations will be allowed to deposit money into this pension account.
EPFO is implementing a one-to-many system, meaning that multiple companies or digital platforms can be associated with a single Universal Account Number (UAN). This will greatly benefit gig workers who have jobs in various locations, as they will be able to manage their PF and pension funds from different employment sources within a single account (UAN).
This new scheme will offer more freedom than the National Pension System (NPS) and will be more flexible. While the NPS has strict rules for post-retirement withdrawals, the EPFO is considering allowing members, starting at age 55, to choose how they want to use their deposits. It will function like a regular PF scheme, accumulating funds until the age of 55, and then converting it into a pension or systematic withdrawal plan.
You can withdraw your pension as per your wish
An official stated that this scheme will be risk-free and will provide realistic returns. After retirement, you will be able to choose your monthly pension. If you only receive the interest earned on your deposits as your pension, your principal amount will remain intact. If you desire a higher pension, you can withdraw from the principal amount and adjust it over time.
Family security has also been addressed.
This proposal also takes into account the safety of the member’s family. According to reports, a family benefit fund will be created. This will allow the member’s spouse, children, or orphans to receive pension benefits. Furthermore, funds from old EPF and GPF schemes may also be allowed to be transferred to this new pension scheme, to further expand the retirement fund.
Learning from Singapore’s model, this scheme is currently in the negotiation stage. According to an official, the EPFO is studying retirement models in countries like Singapore. Its primary objective is to implement the “Code on Social Security,” which will provide gig and platform workers with access to social security for the first time. However, it has not yet been decided which government agency will implement it, and when it will be implemented.
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