The Centre is working on a major overhaul of the Employees’ Provident Fund Organisation (EPFO) by proposing a new pension model under the EPFO 3.0 initiative that aims to bring millions of workers under a formal retirement security system.
The proposed scheme is expected to widen pension coverage beyond the existing Employees’ Pension Scheme (EPS), particularly benefiting gig and platform workers, employees in the unorganised sector and private sector workers whose salaries exceed the current EPS eligibility limit.
As part of the proposed reforms, EPFO’s digital infrastructure will be upgraded and integrated with the Core Banking Solution (CBS), allowing subscribers to access faster and more seamless services.
According to the proposal, every subscriber will be assigned an individual digital pension account. Contributions made by the employee, employer and the government will be credited to this account and invested in long-term, government-backed financial instruments. Once the subscriber reaches the age of 60, the accumulated corpus will be converted into a monthly pension based on the prevailing interest rates.
The proposal also introduces greater flexibility for subscribers. From the age of 55, members may choose how they wish to utilise their retirement savings. At retirement, they can either opt for a regular monthly pension or withdraw their savings in instalments through a Systematic Withdrawal Plan (SWP), depending on their financial requirements.
To improve transparency, the proposed system will feature a digital dashboard where subscribers can monitor their contributions, accumulated corpus and projected pension benefits. The government is also considering establishing a Family Benefit Fund to provide financial assistance to the family or nominee of a subscriber after their death.
The proposed pension framework is expected to significantly expand social security coverage in India. With nearly 418 million people employed in the unorganised sector out of the country’s estimated workforce of 550 million, a large section of workers currently remains outside the formal pension network. The new scheme is intended to bridge this gap and provide long-term financial security after retirement.
The proposal is still under examination and has not yet been officially approved or announced by the Central government.
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