Will India roll out a universal pension? Plan may cover traders, workers & more

India is reportedly considering a Universal Pension Scheme that would be voluntary and contributory, aiming to extend social security beyond traditional employment, according to The Economic Times. The ministry of labour and employment, the report claims, has initiated deliberations on the proposed umbrella scheme, which is expected to integrate existing pension programmes. 

Business Today could not independently verify the report.

"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," a senior government official was quoted as saying in the report.

The proposed framework is being developed under the Employees' Provident Fund Organisation (EPFO), and once finalized, stakeholder consultations will be held to shape its implementation. 

The plan envisions absorbing existing pension schemes 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 offer a monthly pension of ₹3,000 post-retirement, with contributions ranging from ₹55 to ₹200, matched by the government.

Additionally, the Atal Pension Yojana, currently overseen by the Pension Fund Regulatory and Development Authority (PFRDA), may also be integrated into the new framework. The government is exploring the possibility of pooling cess collected under the Building and Other Construction Workers (BoCW) Act to finance pensions for workers in that sector.

The universal pension scheme is expected to target a wide demographic, including unorganised workers, traders, self-employed individuals, and others aged 18 and above who wish to secure pension benefits after turning 60. The Centre may also encourage states to merge their pension schemes with the umbrella initiative to streamline contributions, increase pension payouts, and prevent duplication of beneficiaries.

By 2036, India’s senior citizen population (60 and above) is projected to reach 227 million, accounting for 15% of the total population. This figure is expected to rise to 347 million by 2050, or 20% of the population. 

In contrast, countries such as the US, Canada, Europe, 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.

Currently, 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 ensure a more inclusive and sustainable pension system.