EPFO Universal Pension Scheme Explained: Eligibility, Benefits, TRS Model and Latest Updates

India’s retirement saving system is going to undergo a fundamental revamp as the Central Government is developing a new EPFO-led Universal Pension Scheme as part of the more general EPFO 3.0 reforms. This scheme aims to provide a flexible and inclusive retirement savings framework that is not limited to salaried employees but covers informal workers, gig workers, platform workers and other people not yet part of the organised pension system. The proposal is still in progress and has not been implemented.

Why is a new Pension Scheme needed?

India’s pension system is fragmented. Most workers in the organised sector are covered by the Employees' Provident Fund (EPF) and Employee Pension Scheme (EPS), while most of the informal workforce has little or no retirement security. With nearly 90 percent of India’s workforce in the informal sector, the government believes that it needs to have a more robust and flexible pension system.

What is the proposed target retirement sum (TRS) model?

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Unlike the current EPS with a defined benefit structure, the proposed Universal Pension Scheme is expected to have a defined contribution model based on a Target Retirement Sum (TRS).

In retirement, subscribers would choose the retirement corpus they want to accumulate. The digital platform would then calculate the monthly or periodic contributions required based on factors such as:

1. Desired retirement income
2. Retirement age
3. Contribution frequency
4. Expected investment returns

The system would also provide individualised dashboards showing current savings, projected retirement benefits, and progress toward the target.

Multiple Sources of Contributions

One of the biggest changes is the flexible funding model. Contributions may come from:

1. Employees
2. Employers
3. Government co-contributions for eligible low-income workers
4. Gig and platform aggregators
5. CSR funds
6. NGOs and other third-party contributors
7. Workers with irregular incomes will have better means of saving for retirement.

Flexible Withdrawal Options

At retirement, subscribers may have more than one way to access their pension savings. Instead of having to purchase an annuity, members can choose among:

1. A regular annuity
2. A Systematic Withdrawal Plan (SWP)
3. Customised withdrawal patterns that better match their financial needs
4. Such flexibility will be a benefit in the retirement planning process compared to traditional pension models.

Who could benefit now?

The proposed scheme is to include:

1. Existing EPFO subscribers
2. Informal sector workers
3. Gig workers
4. Platform workers
5. Construction workers
6. Employees currently outside the Employees' Pension Scheme (EPS)

If the proposal is implemented, millions of additional workers will be able to access formal retirement savings, it says.

What Happens next?

The Universal Pension Scheme remains a proposal under the EPFO 3.0 reform program. If approved, it would greatly expand social security coverage while giving people greater flexibility in planning for retirement. The final features, eligibility criteria, and implementation timelines would be finalized after the government has completed consultations and policy approvals.