The government is working on a universal pension scheme that will be offered to all citizens, including those in the unorganised sector, reported NDTV on Wednesday, citing Labour Ministry sources.
Currently, workers in the unorganised sector do not have access to pension schemes such as the National Pension Scheme (NPS), but they can subscribe to Atal Pension Yojana (APY).
Under the APY, subscribers receive a guaranteed minimum pension of ₹1,000, 2,000, 3,000, 4,000, or 5,000 per month after the age of 60 years until death, depending on their contributions.
What is the new universal pension plan?
The Labour Ministry is contemplating a universal pension plan that would be open to both salaried employees and self-employed individuals.
How does the new universal pension plan differ from EPFO?
A key difference between the new universal pension proposal and existing schemes, such as those under the Employees’ Provident Fund Organisation (EPFO), is that individuals will contribute voluntarily, and the government will not make any contributions from its side, reported NDTV.
The key idea behind offering a universal pension scheme is to streamline the country’s pension and savings framework by likely integrating a few existing schemes.
Will the new universal pension plan replace NPS?
The new scheme will not replace or subsume the NPS, which remains a voluntary pension scheme, sources asserted.
Stakeholder consultations will kick off after the proposal document is completed, sources said.
Notably, the central government recently announced the Unified Pension Scheme (UPS) as a sub-set of the NPS. In other words, this will be available as an option under the NPS for government employees.
Initially, the NPS was rolled out only for government employees but was later extended to private sector workers as well.
Like the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF), the NPS follows an EEE (Exempt-Exempt-Exempt) instrument, meaning the entire corpus is exempt from income tax at maturity, and the entire pension withdrawals are tax-free.
