Pension Fund Regulatory and Development Authority
The Indian financial landscape functions effectively and efficiently because of the presence of several regulatory bodies. One such entity is the Pension Fund Regulatory and Development Authority (PFRDA). This entity is responsible for regulating the pension schemes in India. In this article, we’ll take a closer look at what the PFRDA is, the law that governs it, the key functions of the entity and the intermediaries of the PFRDA.
What is the PFRDA?
The full form of PFRDA is Pension Fund Regulatory and Development Authority. It is a government entity that falls under the jurisdiction of the Ministry of Finance. The history of the Pension Fund Regulatory and Development Authority can be traced back to 1999, when the Government of India initiated a national project to assess the security of income for senior citizens in the country.
This resulted in the OASIS (Old Age Social and Income Security) report, which offered suggestions and recommendations for establishing financial security in old age. Based on this report, the Interim Pension Fund Regulatory and Development Authority was formed in August 2003. The primary function of this interim entity was to streamline and develop the pension sector in India.
Thereafter, the final PFRDA Act was passed in 2013, and the Pension Fund Regulatory and Development Authority as we know it today was established. Today, the Pension Fund Regulatory and Development Authority is an autonomous quasi-government body — just like the RBI, SEBI and IRDAI. The two primary pension schemes that the PFRDA administers include the National Pension Scheme (NPS) and the Atal Pension Yojana (APY).
PFRDA Act 2013
The Pension Fund Regulatory and Development Authority Act was formally passed by the then President of India, Pranab Mukherjee, on September 19, 2013. It was notified a few months later, on February 1, 2014. Since then, the PFRDA Act has been the governing law for regulating pension schemes like the National Pension Scheme (NPS). It also helps develop and monitor the pension sector in India.
Functions of PFRDA
The Pension Fund Regulatory and Development Authority performs various functions in order to carry out its key role of regulating and developing the pension sector in India. These functions include the following:
- Establishing, developing and regulating pension funds in the country
- Regulating the NPS and APY schemes under the PFRDA Act
- Registering and overseeing the functioning of intermediaries in the pension sector
- Safeguarding the interests of subscribers to pension funds
- Approving pension schemes and the associated terms and conditions
- Establishing norms for the management of the corpus of existing pension funds
- Setting up a robust grievance redressal mechanism for pension fund subscribers
- Promoting professional organisation of the procedures connected with the Indian pension system
- Settling disputes among intermediaries as well as between subscribers and intermediaries
- Training the intermediaries in the pension system as required
- Educating subscribers and spreading awareness among the general public about pension schemes, retirement savings and other such issues
- Calling for information, conducting inquiries and investigations and auditing intermediaries and other related entities as needed
Intermediaries Under PFRDA
As you may have seen in the functions of the PFRDA listed above, many of the entity’s duties revolve around certain intermediaries. These intermediaries include the following:
The National Pension System Trust (NPS Trust) was established by the PFRDA to oversee the assets and funds under the National Pension System for the benefit of its subscribers. This entity ensures the safeguarding of subscribers’ investments and ensures compliance with the guidelines set by the PFRDA.
Functions of the NPS Trust
- Safeguarding the assets and investments of subscribers
- Ensuring investments align with the PFRDA‘s investment guidelines
- Overseeing and monitoring custodians, pension funds, trustee banks and Central Recordkeeping Agencies (CRAs)
- Redressal of grievances
- Ensuring adherence to the PFRDA’s regulations, circulars, guidelines and directives by intermediaries and the NPS Trust itself
Central Recordkeeping Agencies (CRAs)
Central Recordkeeping Agencies (CRAs) are intermediaries registered under the PFRDA Act, 2013. They are responsible for centralised recordkeeping, administration and customer service for all subscribers of the National Pension System, Atal Pension Yojana and other schemes regulated by the PFRDA.
Functions of Central Recordkeeping Agencies (CRAs)
- Recordkeeping and administration
- Customer service for all NPS subscribers
- Issuing a unique Permanent Retirement Account Number (PRAN), IPIN and TPIN
- Maintaining a database of PRANs.
- Providing web-based access to stakeholders, a call centre facility and a centralised grievance management system
Pension Fund Managers (PFMs)
Pension Fund Managers (PFMs) are professionals who are tasked with the responsibility of managing the capital invested by subscribers via the pension schemes in India. These professionals make important decisions about investing and redeeming the funds.
Functions of Pension Fund Managers (PFMs)
- Allocating funds in a timely manner
- Preparing and dispatching consolidated information about the Investment Preference Scheme
- Preparation of scheme performance reports that are measured using the NAVs of fund units
- Preparing reports on discrepancies, if any
Trustee banks are also intermediaries governed by the PFRDA. They are responsible for managing the daily flow of funds within the pension sector. In addition to this, they also provide regular banking services to subscribers.
Functions of a Trustee Bank
- Collection of NPS funds received via online or physical modes from nodal offices
- Reconciliation of the amount collected from nodal offices with the amount paid by subscribers
- Consolidation of the records of contributions
- Preparation of the Fund Receipt Confirmation records
- Assisting CRAs in the process of settlement of funds
Annuity Service Providers (ASPs)
Annuity Service Providers (ASPs) are intermediaries responsible for managing the annuity payments due to subscribers. They also manage the payments due at the time of a subscriber’s exit from any pension scheme governed by the PFRDA.
Functions of Annuity Service Providers (ASPs)
- Collecting physical application forms from subscribers
- Electronic transfer of subscriber-related data
- Verifying and confirming the exit of subscribers from annuity schemes
- Redressal of subscriber grievances
- Offering confirmation of fund transfers to subscribers from the trustee bank
Point of Presence Agencies (PoPs)
A Point of Presence (PoP) is an intermediary registered with the PFRDA, serving as an interaction point between the subscriber and the NPS system. They handle functions such as registration, KYC verification and fund transmissions. Additionally, they must abide by the regulations under the Prevention of Money Laundering (PML) Act, 2002.
There are some specialised versions like PoP Corporate, which caters to employees and directors of a corporation, and POP Sub Entity, which is an affiliated entity that assumes certain specific POP roles.
Functions of Point of Presence Agencies
- Receipt and verification of application forms and associated KYC documents
- Periodic validation of KYC documentation
- Verification of the details of contributions made via different payment methods like cash, Demand Drafts, cheques or ECS
- Submission of complete forms to CRA/CRA Facilitation Centres (FCs) daily
- Uploading subscriber contribution data into the CRA system
- Transfer of funds to the NPS trust account at the Trustee Bank
Custodian of Securities
A Custodian of Securities is an entity registered under the PFRDA Act to provide custodial services and other services for depository participants. With effect from April 4, 2022, Deutsche Bank AG has been appointed as the Custodian of Securities for the National Pension System (NPS) and other pension schemes in India.
Functions of the Custodian of Securities
- Protection of assets and securities under different pension systems in India
- Maintenance of accounts of securities and assets held under different pension schemes
- Notifying actions by the securities’ issuer that might affect its benefits or rights
- Performing roles in accordance with the Depositories Act, 1996, or under SEBI’s authorisation
- Ensuring accurate and timely record-keeping of related services
Online Services of PFRDA
Various other apex financial and regulatory bodies in India have aligned with the national goal of digitising the financial processes in the country. The Pension Fund Regulatory and Development Authority is not far behind. This regulatory quasi-government body offers the following online services to make pension-related activities and procedures easier for the subscribers of the various pension schemes in India:
- Opening a Tier I account under the National Pension Scheme (NPS)
- Activation of the option Tier II account under the NPS system for voluntary savings
- Contributions to and investments made in existing PRAN accounts (except Atal Pension Yojana and NPS Swavalamban accounts)
- Printing and downloading of the ePRAN
- Modification of the existing investment strategy adopted by pension fund subscribers
- Modification of the personal details of subscribers on the database
- Downloading of the pension account’s statement of transactions at any time, from anywhere (in addition to which a physical copy of the statement is dispatched to subscribers annually)
- Submission of requests for making withdrawals from the pension accounts
- Submission of requests to exit from the pension fund
- Submitting a complaint or reporting any issue or grievance
The Pension Fund Regulatory and Development Authority is one of the many key statutory bodies in India that keep the country’s financial sector functioning smoothly. Established under the PFRDA Act, 2013, it has managed and regulated the pension funds and intermediaries within the pension sector for several years. You can avail of the online services provided by the PFRDA from anywhere, as long as you have an internet-connected device.
Which pension schemes does the PFRDA regulate?
The PFRDA regulates pension schemes like the National Pension Scheme (NPS) and the Atal Pension Yojana (APY).
Can I submit a complaint to the PFRDA?
Yes, the PFRDA allows subscribers to pension funds to file complaints online. You can expect a speedy redressal for complaints filed from the comfort of your home or on the move.
What is the role of intermediaries like CRAs in the pension sector?
Central Recordkeeping Agencies (CRAs) are tasked with various responsibilities like recordkeeping, issuing PRANs, administration and customer service, among other functions. They also maintain a database of all the PRANs issued to subscribers.
Who is responsible for KYC verification in the country’s pension system?
Point of Presence (PoP) intermediaries are responsible for undertaking KYC verification formalities for new subscribers to the pension schemes in India.
Can I open an NPS account online?
Yes, you can open a Tier I NPS account online because the PFRDA provides this facility over the Internet. It is also possible to open a Tier II NPS account online if you wish to.