Labour ministry eyes universal, flexible pension scheme under EPFO
New Delhi, Jun 14, 2026
Labour Ministry is considering a universal pension scheme under EPFO that would let workers contribute flexibly at any time, aiming to widen retirement coverage across formal and informal sectors
The Ministry of Labour and Employment is considering a new pension scheme that would allow workers to contribute any amount at any time towards their retirement savings. This marks a departure from existing pension products that require periodic contributions, according to people familiar with the matter.
The proposed scheme, tentatively 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.
The proposal is distinct from the Unified Pension Scheme administered by the Pension Fund Regulatory and Development Authority (PFRDA) for central government employees.
The proposed EPFO-administered scheme is being conceived as a universal pension platform open to all workers. “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,” the official added.
According to the official, the scheme’s key feature would be flexibility in contributions. Subscribers would be able to deposit money whenever they have surplus funds, 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 in the informal economy, have irregular incomes,” the official said. “Under the new scheme, individuals can contribute whenever they have surplus funds and in whatever amount they choose.”
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 institutional retirement savings.
Queries sent to the Labour ministry did not elicit a response until press time.
Under the proposal, each subscriber would be assigned a unique account number similar to the Universal Account Number (UAN) used by EPFO. The pension account would be linked to this identifier, enabling workers to continue contributing regardless of changes in employment status.
Accounts would remain active even if subscribers stop contributing for extended periods, unlike some 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), EPS and Employees’ Deposit Linked Insurance (EDLI). According to officials, subscribers would enrol separately in the scheme, and each would be given an account identifier and QR code to facilitate direct contributions.
Returns under the proposed pension scheme 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 on retirement. Once a subscriber reaches the age of 60, they may be allowed to withdraw a portion of the accumulated corpus as a lump sum or opt for an annuity providing 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 EPS, the National Pension System (NPS), the Atal Pension Yojana (APY), and various social assistance pensions run by central and state governments.
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 offer a common pension product with greater flexibility and wider accessibility.
A new playbook
• Workers can contribute any amount, at any time
• Open to both formal and informal workers
• Participation not linked to an employer
• Returns likely linked to EPF interest rates
• Account remains active despite contribution gaps
• Partial withdrawal and annuity options on table
[The Business Standard]
