EPFO working on universal PF scheme for gig, self-employed workers
What's the story
The Employees' Provident Fund Organisation (EPFO) is said to be working on a universal provident fund (PF) scheme, according to The Times of India. The initiative would benefit self-employed individuals, gig workers, unorganized sector employees, and those working in exempted establishments. The proposed scheme will allow people outside the EPFO network to voluntarily contribute a part of their income toward retirement savings.
Scheme details
Proposed scheme to offer tax benefits like current EPF system
The proposed PF scheme will be similar to the current EPF system during its accumulation phase.
Subscribers will have the flexibility to choose their contribution frequency, from daily to yearly, with their accumulated corpus earning annual interest.
The scheme is also expected to offer tax benefits like those under the EPF, with annual contributions up to ₹2.5 lakh and interest earned on them under the proposed scheme potentially being tax-exempt.
Withdrawal flexibility
Changes to withdrawal options under proposed scheme
The EPFO is also considering changes to the withdrawal phase of the proposed scheme.
Instead of forcing subscribers to withdraw their corpus at retirement, they may be allowed to keep their savings with EPFO and withdraw them gradually through a systematic withdrawal plan (SWP)-like mechanism.
This option could also be extended to existing EPF subscribers, offering more flexibility in managing retirement funds.
Coverage expansion
Scheme part of government's push for universal social security coverage
The proposed scheme comes as part of the government's efforts to extend social security coverage beyond organized sector workers.
The Code on Social Security, 2020 empowers the Centre to frame such schemes for gig workers, platform workers, and unorganized workers.
However, no universal EPF scheme has been notified so far.
Despite not having a formal mandate from the government yet, EPFO has floated a tender for designing and developing IT architecture required for this scheme.
Funding model
Proposed scheme to be self-funded, studying international models
The proposed scheme will be completely self-funded, unlike the Pradhan Mantri Shram Yogi Maandhan Yojana where the Centre matches contributions toward pension savings.
Government officials told TOI that discussions are at an initial stage and various international models, including Singapore's retirement savings framework, are being studied before finalizing the proposal.
If approved, this could bring millions of freelancers and self-employed individuals under a formal retirement savings framework for the first time.