The government is working on a new contributory pension framework under the Employees’ Provident Fund Organisation (EPFO) that would extend retirement coverage to unorganised-sector workers and gig workers.

The idea is to build a system in which contributions accumulate over time, remain invested in long-term government-backed securities and are eventually converted into a pension at the age of 60, based on an annuity and prevailing interest rates.

Officials quoted by The Indian Express said the proposal is part of the next phase of EPFO reforms, or EPFO 3.0.

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The blueprint begins to take shape

The planned structure would create individual pension accounts on EPFO’s digital platform, with members able to contribute through multiple channels, including themselves, employers, third parties and, in the case of gig and platform workers, aggregators.

The scheme is being studied as a way to cover workers currently outside the employees’ pension scheme while using ideas from international retirement models, such as Singapore’s.

Members may be able to decide the purpose of retirement savings at 55, after which the corpus could be converted into an annuity or a systematic withdrawal plan.

The scheme learns a few new tricks

The proposed system appears designed to be more flexible than the current pension framework.

One official said the scheme would work “like PF” during the accumulation phase, after which it could shift into a withdrawal plan at retirement. Another official said the system would allow users to simulate pension amounts based on factors such as age, corpus, interest rate and retirement age and would display projected monthly pension and corpus figures on personalised dashboards.

The scheme could include family and survivor pensions funded through a pooled family benefit fund.

The larger social security question

The broader policy push comes against the backdrop of India’s large informal workforce. Out of India’s 55 crore workforce, about 76%—nearly 41.8 crore workers—are in the unorganised sector and have limited or no pension coverage.

The new scheme also aims to address coverage for building and construction workers and to bring higher-wage workers outside the current EPS wage ceiling into a contributory retirement framework.

The Code on Social Security, 2020, already empowers the centre to frame social security schemes for gig workers, platform workers and unorganised workers, but no universal EPF scheme has yet been notified.

When will EPFO’s pension overhaul become reality?

At this stage, the proposal remains under discussion, and officials quoted said the design is still being finalised.

The nodal agency for implementation has not yet been decided by the labour ministry, even as EPFO’s digital and banking infrastructure is being upgraded under the EPFO 3.0 plan.

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FAQs

Q1: Will gig workers get EPFO benefits under the new scheme?

The proposed EPFO scheme is being designed to extend retirement savings and pension coverage to gig workers, though it has not yet been officially notified.

Q2: Is the new EPFO pension scheme available for self-employed people?

The government has not announced the scheme yet, but reports say it may be opened to self-employed workers on a voluntary basis if approved.