EPFO Social Security Scheme: If you are not in a permanent job, engage in freelancing, own a business, or work as a gig worker for companies like Ola, Uber, and Zomato, there’s good news for you. You can now relax about your retirement savings and PF.
As reported by the Times of India, the Employees’ Provident Fund Organization (EPFO) is working on a special “Universal PF Scheme” to offer enhanced social security coverage to numerous workers in the unorganized sectors of the country, including freelancers, gig workers, and the self-employed. Let’s delve into the details of this new scheme and how it will be advantageous for you.
What is this new scheme and how will it function?
Previously, the PF deduction rule was only applicable to companies with a workforce of 20 or more. Nonetheless, under this fresh scheme, individuals beyond this category will have the opportunity to participate in the PF:
The scheme will operate on a self-financing basis, meaning no contribution will be required from any company or employer; instead, individuals will deposit a portion of their earnings into their PF accounts. There are no stringent regulations concerning fund deposits in this scheme. New account holders will have the liberty to contribute funds daily or annually, based on their convenience.
Contributions to this account will earn yearly interest, similar to regular PF accounts. Moreover, contributions up to Rs 2.5 lakh annually will be completely exempt from income tax.
New retirement withdrawal formula: SWP facility
EPFO is also gearing up to simplify and make the withdrawal rules more appealing under this scheme:
Funds will be disbursed akin to a pension: Instead of withdrawing the entire sum at retirement, account holders can opt for a ‘Systematic Withdrawal Plan’ (SWP).
Tailored Payouts: Through this approach, individuals can choose the amount they wish to receive each month or at specific intervals. They can opt for a larger sum initially or save more for later years.
Funds will stay with the EPFO: Post-retirement, individuals can retain their entire fund with the EPFO to continue accruing interest. This provision may also be extended to existing PF subscribers.
Drawing inspiration from the Singapore model
To finalize this framework, EPFO has extensively examined social security systems in various countries globally, with a significant focus on Singapore’s model (Singapore Central Provident Fund Model).
The primary objective of the government under the Social Security Code (2020) is to encompass every citizen within the ambit of social security. Once implemented, Ola and Uber drivers, Zomato and Swiggy delivery partners, freelance consultants, small shop owners, and tutors will be able to secure their old age comprehensively with government support.