The overhaul of the Employees’ Provident Fund Organisation (EPFO) is underway as the government is working to significantly expand India’s retirement savings framework.
As per the proposed EPFO 3.0 reforms, the retirement fund body is planning a universal pension system that could cover not only salaried employees but also gig workers, platform workers and those in the unorganised sector.
The proposed scheme will work on a defined contribution model. During a worker’s earning years, contributions will accumulate much like the Employees’ Provident Fund (EPF), with the money invested in government-backed securities and interest credited annually, reports said.
The proposal is still under development and has not been officially announced by the government.
It will mark one of the biggest changes to India’s social security architecture by allowing workers to build retirement savings through contributions from multiple sources and choose how they receive their pension after retirement.
Further, unlike the existing EPF system, where members generally receive a lump sum at retirement, EPFO 3.0 seeks to provide greater flexibility in generating regular post-retirement income.
Members could increase withdrawals during the early years of retirement by drawing from their principal or reduce withdrawals so that more interest remains invested, potentially increasing future payouts, report said.
A key feature under the scheme is the introduction of a Target Retirement Sum (TRS). Members will be able to choose a retirement goal and expected retirement age. Based on these inputs, the EPFO system would estimate how much needs to be contributed over the years to achieve that target.
Technical upgrades
EPFO is also preparing to introduce significant technology-driven overhaul designed to modernise how members interact with their Provident Fund (PF) accounts.
It will create a faster, more transparent and paperless ecosystem, making PF-related services easier to access and manage.
Although the upgraded platform has generated considerable interest among subscribers, the much-anticipated UPI and ATM-based withdrawal facility is yet to become operational.