EPFO 3.0 will provide new flexible pension, gig workers and freelancers will also get huge benefits.

A very big and positive news is coming out regarding post-retirement social security for crores of employed people of the country, workers in the unorganized sector and gig workers associated with digital platforms. The Central Government is rapidly working on a very modern, flexible and contributory new pension scheme under the upcoming phase of Employees Provident Fund Organization i.e. EPFO ​​3.0. According to media reports, this new proposed pension scheme will be much more comprehensive and transparent than the existing EPS (Employees’ Pension Scheme). Its biggest advantage will be that it will not be limited only to traditional organized sector employees, but will also include delivery partners, cab drivers, freelancers and those high income group employees who are currently outside the rules of EPS.

A completely separate pension account will be opened in the name of the employee: Secure interest will be added every year on investment.

According to the information that has come to light regarding the structure of this new scheme, it will be completely based on the Defined Contribution Model. Under this, a completely separate and dedicated pension account will be opened in the name of each eligible employee. The amount deposited from time to time in this account will be invested in completely safe and government-backed investment options, so that the fund is protected from market risks. The interest received on this safe investment will be added to the employee’s account every year. Whenever a member completes 60 years of age, he will start receiving a fixed and regular monthly pension based on the total accumulated amount standing in his account. This will give employees a better opportunity to manage their own retirement planning.

What is this new TRS concept: Decide yourself how much pension you want on retirement

The most revolutionary and attractive feature of this new proposal of EPFO ​​3.0 is its concept of TRS i.e. ‘Target Retirement Sum’. Under this unique system, any employee will be able to determine in advance, during his employment, how much pension amount he requires every month after the age of 60 years. On the basis of this financial target set by the employee, the EPFO ​​system will automatically calculate and tell how much contribution will have to be made every month or annually to reach that target. Additionally, members will also get access to a high-tech digital dashboard where they can track their live contributions, total deposits and actual progress towards retirement goals in real time and update their goals as and when required.

Many employers will be connected to the same UAN: Aggregator companies and government will also help

Another important feature of this new system is that in this only the employee and his main employer will not deposit the money. To strengthen the social security of low-income and unorganized sector workers, the government, gig economy aggregator companies, Corporate Social Responsibility (CSR) funds and non-governmental organizations (NGOs) will also be able to contribute financially. Along with this, EPFO ​​is working on an advanced centralized system in which the same Universal Account Number (UAN) can be linked to multiple employers or different digital platforms simultaneously. This will directly benefit those youth and freelancers who work for multiple companies or apps at the same time, as all their PF and pension amount will be visible safely at one place.

How different will this scheme be from NPS: You will get great options after the age of 55

This new proposed scheme is expected to be quite different and more flexible than the currently running National Pension System (NPS). While in NPS a large amount has to be compulsorily converted into annuity at the time of retirement, in this scheme of EPFO, after crossing the age of 55 years, members will get complete right to choose how they want to use their funds. If the employees wish, they can take only the interest as pension every month while keeping their principal amount completely safe. If they need more money, they can also choose to withdraw part of the principal amount. Apart from this, to ensure the security of the family, the government is also considering including a strong system of family and survivor pension for spouse, children and orphan dependents. However, this entire scheme is still under consideration at the government level and the official date of its implementation is yet to be announced.