The Central government is working on a new contributory pension scheme aimed at extending retirement benefits to gig workers, unorganised sector employees, self-employed individuals, construction workers, and even workers outside the traditional EPFO framework. The proposed initiative is part of broader EPFO 3.0 reforms designed to expand India’s social security net and provide long-term financial security to millions of workers currently without formal retirement benefits.
According to officials familiar with the proposal, the scheme would allow eligible workers to make regular voluntary contributions into an individual retirement account. The accumulated corpus would be invested in government-backed securities, with interest credited annually. At the age of 60, subscribers would be able to convert the accumulated Target Retirement Sum (TRS) into a regular pension based on prevailing annuity and interest rates.
A Major Expansion of India’s Pension Coverage
India has an estimated 55 crore workers, of whom nearly 41.8 crore—or around 76%—are employed in the unorganised sector, according to government estimates. Most of these workers currently lack access to employer-sponsored pension benefits or provident fund coverage, making retirement planning a significant challenge. The proposed scheme seeks to bridge this gap by creating a portable pension system that workers can continue contributing to regardless of where or how they are employed.
India’s Workforce at a Glance
| Metric | Estimated Figure |
|---|---|
| Total workforce | 55 crore |
| Unorganised sector workers | 41.8 crore |
| Share of workforce in unorganised sector | 76% |
| Proposed retirement age | 60 years |
How the Proposed Scheme Could Work
Unlike traditional EPF, which is linked to salaried employment, the proposed pension framework is expected to be portable and contribution-based, allowing workers with irregular incomes to contribute according to their earning capacity.
Officials indicated that the accumulated funds would be invested in long-term government-backed instruments to generate returns over time. Upon reaching the age of 60, subscribers could convert the accumulated corpus into a pension, providing a steady post-retirement income.
Who Could Benefit?
The proposed pension scheme is expected to cover a broad range of workers who currently remain outside India’s formal retirement system, including:
- Gig and platform workers
- Self-employed professionals
- Construction workers
- Daily wage labourers
- Workers in the unorganised sector
- Employees outside the EPFO network
The move complements the government’s broader efforts to extend social security benefits to gig workers through the Code on Social Security, 2020, while integrating more workers with the e-Shram database.
Part of EPFO 3.0 Reforms
The proposed pension scheme forms part of the government’s wider EPFO 3.0 reform agenda, which aims to modernize India’s social security architecture by making benefits more inclusive, portable, and digitally accessible.
In recent months, the government has also directed digital platform companies to register gig workers on the e-Shram portal, laying the groundwork for extending pension, insurance, and other welfare benefits to this rapidly expanding workforce.
Why It Matters
India’s gig economy is growing rapidly as more workers earn income through digital platforms, freelancing, and independent contracting. However, many of these workers lack access to employer-funded retirement savings or pension plans.
A universal contributory pension scheme could significantly improve retirement security by encouraging long-term savings while reducing dependence on informal family support during old age. It would also represent one of the most significant expansions of India’s social security framework in recent years.
Looking Ahead
The proposal is still under discussion, and the government is yet to announce the final structure, contribution rates, eligibility criteria, and implementation timeline. However, if approved, the scheme could bring millions of gig workers, self-employed individuals, and unorganised sector workers into India’s formal retirement ecosystem for the first time, marking a major step toward universal social security coverage.
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