Govt's New Pension Plan For Gig Workers Under EPFO 3.0: All You Need To Know

The government is working on a new contributory pension scheme aimed at bringing gig workers and unorganised sector employees under a retirement security net. The initiative, planned as part of the next phase of reforms under the Employees' Provident Fund Organisation (EPFO), seeks to cover workers currently excluded from the Employees' Pension Scheme (EPS).

Out of India's 55 crore workforce, nearly 41.8 crore workers, or 76%, belong to the unorganised sector and currently have limited or no pension coverage. The proposed scheme is designed to extend retirement benefits to this segment, along with gig and platform workers, building and construction workers and higher-wage employees who currently fall outside EPS coverage.

How The Scheme Will Work

Under the proposed structure, contributions from workers will accumulate over time and remain invested in long-term, government-backed securities and approved instruments, with interest credited annually. At the age of 60, the accumulated corpus, referred to as the "Target Retirement Sum" (TRS), would be converted into a pension based on prevailing annuity and interest rates, according to The Indian Express.

"Under the proposed scheme, at the age of 55 years, a worker can decide the purpose for retirement savings. Till that time, 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," a government official told The Indian Express.

Each member would have an individual pension account on EPFO's digital platform. The system will dynamically compute the TRS based on a member's chosen pension goal and expected retirement age, and personalised dashboards will show total contributions, corpus status, and progress toward the target, another official said. Members will also be able to adjust their TRS, with contribution requirements recalculated accordingly. The platform will accept and categorise contributions from multiple sources, including members, employers, and third parties.

Flexibility Built Into Payouts

The scheme will differ from the National Pension System (NPS), which is purely annuity based. The new scheme is intended to be more flexible and based on real, rather than notional, returns. A source cited by the publication compared it to a provident fund model where contributions stop only after retirement, after which a systematic withdrawal plan takes over based on the member's expected monthly payout.

"If 8% interest is declared and that 8% over Rs 1 crore is translating to Rs 8 lakh, so you divide it by 12 and that becomes your pension payout every month," the source explained, adding that members could also choose higher payouts in the initial years through a drawdown from the principal, depending on their estimated longevity.

The EPFO 3.0 system will allow users to simulate pension amounts based on age, corpus, interest rate, and retirement age, with optional inflation-adjusted projections. It will display estimated monthly pension, projected retirement corpus, and comparative graphs to help members evaluate different scenarios, accounting for variable contributions and multiple employment histories.

Coverage For Gig Workers, Aggregator Contributions

The scheme will adopt a defined contribution framework, drawing funds from workers, employers, government co-contributions for lower-wage segments, aggregators for gig and platform workers, and corporate social responsibility or third-party funds.

The Code on Social Security, 2020, has already brought gig and platform workers under the social security ambit, mandating aggregator contributions of 1-2% of annual turnover, capped at 5% of the amount payable to workers. Notably, the new initiative would operationalise this through flexible co-contribution models, ensuring that delivery partners, drivers and other platform workers are systematically included.

The scheme will also extend to building and construction workers, of whom India has over 3.5 crore registered under welfare boards, with net cess collections exceeding ₹70,000 crore across states. The scheme would channel these funds into structured, portable pension benefits for this segment.

Family and survivor pensions for spouses, children, and orphans are also proposed, to be funded through a pooled "Family Benefit Fund" managed on actuarial principles. Members of EPF, GPF, and other provident funds may be allowed to transfer their balances into the new scheme.

Part Of Broader EPFO 3.0 Overhaul

The new pension initiative is part of the broader EPFO 3.0 reform push, which will also introduce new technology features and upgrade the retirement body's systems to a core banking solution. It is to be noted that global retirement models, including Singapore's, are being studied to shape the scheme.

The nodal agency for implementing the wider social security coverage for gig and unorganised workers is yet to be finalised by the Ministry of Labour and Employment, though the initiative is expected to use EPFO's digital infrastructure.