The Ministry of Labour and Employment is considering a new pension scheme that would allow workers to contribute to their retirement savings at their convenience, marking a departure from existing pension models that require periodic contributions, according to people familiar with the matter.
The proposed scheme, tentatively being referred to as a Unified Pension Scheme (UPS), is expected to be administered by the Employees’ Provident Fund Organisation (EPFO) and would be open to all workers, irrespective of whether they are employed in the formal or informal sector.
“It is being envisaged as a universal pension product that any worker can subscribe to,” a senior government official said. “Unlike existing schemes, participation will not be linked to an employer, and subscribers will be able to contribute directly.”
Under the proposal, each subscriber would be assigned a unique account number similar to the Universal Account Number (UAN) used under EPFO. The pension account would be linked to this identifier, enabling workers to continue contributing regardless of changes in employment status.
The move comes as the government seeks to expand pension coverage beyond the organised workforce. While schemes such as the Employees’ Pension Scheme (EPS) cater primarily to salaried workers in the formal sector, a large share of India’s workforce remains outside the ambit of institutional retirement savings.
According to the official, the key feature of the proposed scheme would be flexibility in contributions. Subscribers would be able to deposit any amount at any time, without the obligation to make regular monthly, quarterly or annual payments.
“One of the biggest challenges with existing pension products is the requirement for periodic contributions. Many workers, especially those in the informal economy, have irregular incomes,” the official said. “Under the new scheme, individuals can contribute whenever they have surplus funds available and in whatever amount they choose.”
Accounts would remain active even if subscribers stop contributing for extended periods, unlike some existing financial products that become dormant after prolonged inactivity.
The scheme is expected to operate alongside existing EPFO-administered social security programmes, including the Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS) and Employees’ Deposit Linked Insurance (EDLI). Officials said subscribers would enrol separately and the scheme would have its own account identifier and QR code.
Returns under the proposed pension product are likely to be linked to the interest rate declared annually by the government for EPF deposits, the official said.
The government is also considering multiple payout options upon retirement. Once a subscriber attains the age of 60, they may be allowed to either withdraw a portion of the accumulated corpus as a lump sum or opt for an annuity that provides periodic payments over a fixed period, such as 10 or 15 years.
However, officials indicated that restrictions would be built into the withdrawal framework to ensure that a portion of the savings remains earmarked for retirement income. “We will have to prescribe some conditions so that the entire corpus is not withdrawn at one go. A framework similar to the National Pension System, where a portion is mandatorily used for annuity, could be considered,” the official said.
The proposed scheme would coexist with existing pension programmes, including the Employees’ Pension Scheme (EPS), the National Pension System (NPS), the Atal Pension Yojana (APY), and various social assistance pensions run by central and state governments. However, unlike these schemes, which cater to specific segments of the workforce or beneficiary groups, the new scheme is being conceived as a universal pension platform open to all workers, irrespective of their employment status.
While EPS covers organised-sector employees and NPS serves government employees and voluntary subscribers, APY targets workers in the unorganised sector through fixed periodic contributions. Officials said the proposed scheme would provide a common pension product with greater flexibility in contributions and wider accessibility.
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