Role of Pension Fund Regulatory and Development Authority (PFRDA)

Pension Fund Regulatory and Development Authority (PFRDA) is a regulatory body established in 2003 with its headquarters in New Delhi. PFRDA was initially designed for government employees exclusively, but its services were subsequently expanded to include all Indian nationals and NRIs, including self-employed persons.

On 23rd August 2003, the Interim Pension Fund Regulatory & Development Authority (PFRDA) was established through a resolution by the Government of India to promote, develop, and regulate the pension sector in India.

The Pension Fund Regulatory & Development Authority Act was passed on 19th September 2013 and the same was notified on 1st February 2014. PFRDA regulates NPS, subscribed by employees of Govt. of India and State Governments and by employees of private institutions/organizations & unorganized sectors.

 PFRDA regulates NPS, subscribed by employees of Govt. of India and State Governments and by employees of private institutions/organizations & unorganized sectors. NPS is now regulated under the PFRDA Act, 2013 and the regulation framed thereunder by the Department of Financial Services and PFRDA.

The PFRDA’s preamble declares that the authority’s goals are to “promote old age income security by creating, growing, and regulating pension funds, to safeguard the interests of subscribers to pension fund schemes, and for issues associated with or incidental thereto.

PFRDA Promotes pension plans by encouraging both obligatory and voluntary pension schemes to meet the retirement income demands of retired employees.

The National Pension system both tier 1 and tier 2 is supervised and regulated by PFRDA

The National Pension System (NPS) has an unbundled Architecture, where each function is performed by a different entity. NPS is a unique product that provides an opportunity for subscribers, to be serviced by different intermediaries like Pension Fund Managers; Central Record Keeping Agency (CRA); Trustee Banks; POP; Annuity Service Providers (ASP); and Custodian services etc. are appointed by PFRDA

Pension Funds (PFs):

PFs manage the retirement savings of the subscribers under NPS. The PFs are required to invest strictly by the guidelines issued by the Govt. of India PFRDA. The number of pension funds shall be determined by regulations and the Authority may, in the public interest, vary the number of pension funds. Following are the current pension funds in India.

SBI Pension Funds Pvt. Limited LIC Pension Fund Limited UTI Retirement Solutions Limited ICICI Prudential Pension Fund Management Company Limited Kotak Mahindra Pension Fund Limited Reliance Capital Pension Fund Limited HDFC Pension Fund Limited Birla Sun Life Pension Management Ltd.

* Note: The Hon’ble High Court, Delhi has permitted HDFC Pension Management Company Ltd to carry on pension fund management business till further orders.

Central Recordkeeping Agencies:

Central Recordkeeping Agencies (CRAs) are responsible for the centralized recordkeeping, administration, as well as customer service functions for all NPS subscribers. PFRDA appointed NSDL as the Central Recordkeeping Agency (CRA) for the National Pension System.

Trustee Bank:

Trustee Bank manages the banking of pension funds by the applicable provisions of the NPS, the scheme, guidelines/notifications issued by PFRDA, the Ministry of Finance, and the Government of India from time to time. Axis Bank Ltd. is appointed as a Trustee Bank for pension funds.

 Point of Presence (PoPs):

Point of Presence (PoP) is an entity appointed by the PFRDA to provide services to all the citizens of India to open and operate their NPS accounts. PoPs perform all due diligence in accepting the NPS Contribution Instruction Slip (NCIS) from you, check the PRAN no., Name, Payment details, etc., and upload your contribution details online into the CRA system, then remit the clear funds to your PRAN after deducting the charges including applicable taxes to the Trustee Bank on T+1 working day basis (T: date of receipt of clear funds), Changing subscriber details, etc. They perform these functions through their network of branches called POP Service Providers (POP-SP). At present, More than 60 POPs with over 36000 POP-SPs are registered for providing NPS services.

Annuity Service Provider (ASP):

ASPs would be responsible for delivering a regular monthly pension to the selected choice of annuity by the subscriber. At present, 7 Annuity service providers have been selected to provide the Annuity.

Note: The addition or deletion of intermediaries like PF, POP, and ASP is a continuous process. (Source: PFRDA website). The latest list of PFs, POPs, and ASPs is available on the PFRDA website.

Custodian Services:

The Custodian of Securities is the entity that has been granted a certificate of registration by the PFRDA for the safekeeping of securities or assets held under the NPS or Atal Pension Yojana (APY). Stock Holding Corporation of India Ltd. provides custodial services under NPS.

What is the New Defined Contribution Pension System?

The Government of India had, in the year 1999, commissioned a national project titled “OASIS” (an acronym for Old Age Social & Income Security) to examine policy related to old age income security in India. Based on the recommendations of the OASIS report, the Government of India introduced a new Defined Contribution Pension System for the new entrants to Central/State Government service, except the Armed Forces, replacing the existing Defined Benefit Pension System. On 23rd August 2003, the Interim Pension Fund Regulatory & Development Authority (PFRDA) was established through a resolution by the Government of India to promote, develop, and regulate the pension sector in India.  The contributory pension system was notified by the Government of India on 22nd December 2003, now named the National Pension System (NPS) with effect from 1st January 2004. The NPS was subsequently extended to all citizens of the country from 1st May 2009 including self-employed professionals and others in the unorganized sector voluntarily.

Read: THE PENSION SCHEMES AND PRODUCTS IN OPERATION IN INDIA

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