EPFO considers new flexible pension structure for retirees

The Employees' Provident Fund Organisation (EPFO) is considering a proposed universal pension structure designed to offer greater flexibility for retirees. According to a concept paper prepared by the Ministry of Labour, the new framework may allow contributors to adjust their pension amounts over time. For instance, members could choose to withdraw a portion of their savings to receive higher payments during the early years of retirement, subsequently reducing payments to allow the remaining balance to accrue interest.

The proposed system may also introduce a ‘Retirement Target Amount’ (TRS), enabling contributors to set specific retirement income goals and estimate the necessary contributions based on age and desired pension levels. A digital dashboard could be provided to track progress toward these goals. Additionally, the structure might allow contributions from diverse sources beyond the employee and employer, such as government assistance for low-income workers, gig platforms, CSR programs, and NGOs.

Under current Employees' Pension Scheme (EPS) 1995 rules, eligibility for a pension requires a minimum of 10 years of continuous contribution. Pension payments typically begin at age 58, though early retirement is possible with a reduced annual pension amount. While the new proposal aims to modernize these options, the Ministry of Labour and the EPFO are still working on the detailed structure.