The new digital pension model will use a unified pension algorithm, significantly speeding up provident fund tracking and payment settlement. The government plans to use a single, centralized digital architecture for organized and unorganized sector workers, and this technology will make social security more transparent and accessible to the person of last resort.

Regular income after retirement is every employee's biggest concern. Keeping this in mind, the central government is working on a new pension system called EPFO ​​3.0. According to media reports, the proposed scheme aims to provide pension security to millions of people who are currently not covered under the Employee Pension Scheme (EPS). This new pension scheme is expected to cover both organized and unorganized sector employees. However, the scheme has not yet been officially announced by the government or the EPFO. 

The government will soon launch a new pension scheme.

According to reports, this will be a contribution-based pension scheme, meaning regular contributions can be made by the employee, employer, and other sources as needed. Deposits will be invested in government-backed long-term investment options, building a substantial retirement fund over time. This fund can be used as a monthly pension after retirement.

Target Retirement Sum (TRS) could play a key role in this new scheme. TRS represents the target amount an employee wants to accumulate in their account by retirement. The system will estimate the monthly contribution based on the employee's age, expected retirement date, and fixed pension target. This will allow employees to know in advance how much they need to save to reach their desired retirement fund.

After age 55, employees will be able to choose how they want to use their retirement funds. They will have two options.

Fixed pension every month by converting deposit into annuity

Regular withdrawals through Systematic Withdrawal Plan as per requirement

With this, people can choose the option according to their financial needs.

Under this system, a separate pension account can be created for each member. According to the report, members will also have access to a digital dashboard where they can easily view:

What is the total contribution made so far?

Current status of retirement fund

How much fund has been created against the TRS target?

How much contribution should be made in the future?

This can make the entire process more transparent and easier than before.

How will the contribution amount be decided in the new pension scheme?

The system will also indicate the frequency with which members must make deposits and the number of times they must be made to achieve a fixed TRS. If a member changes their retirement target in the future, the system will calculate the new contribution amount accordingly. Contributions from the employee, employer, and other approved sources will be recorded separately in the scheme. It should be noted that the new pension scheme may be more flexible than the NPS. While the pension in the NPS is primarily based on the annuity model, the new scheme may also offer the option of withdrawals based on needs.

PC: Jagran