The Indian government is working on a universal pension scheme aiming to extend social security beyond traditional employment, particularly to workers in the unorganised sector, multiple reports have indicated.
“The scheme, which would be voluntary and contributory, will not be tied to employment and hence will be open for everyone to contribute and earn a pension,” The Economic Times quoted a senior government official as saying.
Meanwhile, NDTV also reported that the government is working on a universal pension scheme that will be offered to all citizens, including those in the unorganised sector, citing Labour Ministry sources.
The Labour Ministry has reportedly initiated deliberations on an umbrella pension scheme, which is expected to integrate existing pension programmes such as the Pradhan Mantri Shram Yogi Maandhan (PM-SYM) and the National Pension Scheme for Traders and Self-Employed (NPS-Traders). These schemes currently provide a Rs 3,000 monthly pension post-retirement, with contributions ranging from Rs 55 to Rs 200, matched by the government.
Currently, workers in the unorganised sector do not have access to pension schemes such as the National Pension Scheme (NPS), though they can subscribe to the Atal Pension Yojana (APY). Under APY, subscribers receive a guaranteed minimum pension of Rs 1,000, 2,000, 3,000, 4,000, or 5,000 per month after the age of 60, depending on their contributions.
As per reports, the new scheme will not replace or subsume the NPS, which will continue as a voluntary pension plan.
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 direct financial contributions.
The scheme aims to streamline the country’s pension and savings framework by integrating multiple existing programmes.
Stakeholder consultations will begin once the proposal document is finalized, it was reported.
Key features of the proposed scheme
The proposed universal pension scheme will be open to all citizens, including salaried employees, self-employed individuals, and workers in the unorganised sector. Participation will be voluntary, and individuals will contribute to their pensions without direct financial input from the government. The scheme may integrate existing pension programmes such as the Atal Pension Yojana (APY) and streamline government-run savings structures to enhance efficiency.
It will be administered under the Employees’ Provident Fund Organisation (EPFO), with stakeholder consultations planned once the framework is finalized. Additionally, the Centre may encourage states to merge their pension schemes with this initiative to increase payouts and reduce duplication of beneficiaries.
Unlike EPFO schemes, where contributions are mandatory for salaried employees, the proposed scheme will allow voluntary participation for any individual aged 18 and above, providing financial security after retirement.
According to reports, the government is also exploring the possibility of pooling cess collected under the Building and Other Construction Workers (BoCW) Act to finance pensions for workers in that sector.
Growing need for a universal pension system
With India’s senior citizen population expected to reach 227 million by 2036 and 347 million by 2050—accounting for nearly 20% of the total population—a robust pension system is becoming increasingly crucial.
Countries such as the US, Canada, European nations, Russia, and China already have established social security systems covering pensions, healthcare, and unemployment benefits. Nations like Denmark, Sweden, Norway, the Netherlands, and New Zealand currently provide universal pension schemes.
At present, India’s social security network largely revolves around the provident fund system, supplemented by old-age pensions and health insurance for targeted beneficiaries, primarily those below the poverty line. The proposed scheme aims to expand coverage and create a more inclusive and sustainable pension system.
(With inputs from agencies.)