SMALL WINDOW TO REDESIGN PENSION

NDIA is reworking the architecture of social security.

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The labour codes are edging closer to implementation, with draft rules under public consultation. At this juncture, a central question comes into focus: will the evolving design of social security align with workers’ lived realities? One clue lies in how provident funds are being accessed.In June 2025, the Employees’ Provident Fund Organisation (EPFO) raised the auto-settlement limit for advance claims from @1 lakh to %5 lakh. In the 10 weeks that followed, close to 70 percent of PF advance claims were processed automatically. From an administrative standpoint, this is a success. From a system design perspective, it invites a deeper enquiry into what workers expect.

PFs were conceived as instruments of long-term savings. In practice, workers increasingly use them to manage unavoidable disruptions to income and consumption. The instinctive explanation is weak financial discipline. That reading misses a deeper reality. For a large share of India’s workforce, liquidity is not a preference; it is a constraint. When wages are modest and uncertainty persistent, the time value of money weighs heavily on every decision.

Seen this way, withdrawals are signals on how workers smooth consumption across uneven working lives. The larger question, therefore, is what role PFs should play and where responsibility for old-age income should ultimately rest.