EPFO 3.0: Universal pension, social security for gig workers on the anvil

The Employees’ Provident Fund Organisation (EPFO) is planning a major overhaul of its systems and schemes under what is being called EPFO 3.0. The proposed changes include a universal pension cover for all workers, social security contributions for unorganised sector workers—including gig and platform workers—and a technological upgrade to incorporate a core banking solution (CBS).

Over the past year, the retirement fund body has focused on improving access to funds and simplifying claims settlement under EPFO 2.0. This phase has resulted in a revamped portal with a centralised database that merges 123 regional databases, ensuring timely interest crediting and visibility of eligible balances for withdrawals.

EPFO is now moving towards the next phase of reforms through a CBS-enabled tech platform. This shift is seen as necessary to manage payments for social security schemes covering India’s entire workforce—over 60 crore workers, of whom more than three-quarters are in the unorganised sector with limited or no pension coverage.

CBS is a centralised payments software that forms the backbone of banks in India, allowing operations such as deposits and withdrawals in real time across all branches.

Pension cover for all

The proposed pension cover will follow a defined contribution framework. Contributions will come from multiple sources: workers, employers, government co-contributions for lower-income workers, aggregators in the case of gig and platform workers, and corporate social responsibility (CSR) or third-party funds. For the first time, EPFO is considering such forms of contributions and offering withdrawal options at retirement beyond the current system of advance claims or partial withdrawals for specific purposes like education, illness, housing, and marriage, or a lump-sum final settlement at retirement.

Accumulated contributions will be invested in government-backed securities with annual interest crediting. At retirement, members will have two options to convert their “Target Retirement Sum (TRS)” into a pension based on prevailing annuity and interest rates, or a systematic withdrawal plan.

“Till the time of retirement, 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 told The Indian Express.

The system will dynamically compute the TRS based on the member’s chosen pension goal and expected retirement age. Members will have personalised dashboards showing total contributions, real-time corpus status, and progress towards the TRS. The system will project the required contribution amount and frequency to achieve the declared TRS.

“Adjustments to TRS will be allowed and contribution requirements could then be recomputed accordingly. The system will accept and categorise contributions from multiple sources such as members, employers, or third-parties and update the member’s pension balance,” the official added.

Singapore model, inflation-linked simulation

Global models are being studied, including Singapore’s Central Provident Fund (CPF), which has a deferred annuity scheme that sets aside savings not just for retirement but also for housing and healthcare. In Singapore, individual CPF contributions are supplemented by employers, loved ones, and the government, and members receive differential interest rates. India’s EPFO is exploring similar features to provide a comprehensive social security net.