Pension Fund Regulatory and Development Authority Policy (PFRDA)

The Pension Fund Regulatory and Development Authority Bill, 2011

• Government approved the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 on 16th November 2011. This Bill was introduced in Lok Sabha on 24th March 2011.
  
• Government has agreed to the proposed 26 per cent foreign investment in the pension sector.
  
• The bill does not provide assured return to the subscribers of the Pension fund in the proposed law.
  
• The Bill, which has already been scrutinized by the Parliamentary Standing Committee on Finance, is likely to be taken up for consideration and passage in the Winter Session beginning November 22.
  
• Government of India had set up an Interim Pension Fund Regulatory and Development Authority (PFRDA) in 2003 to and gives statutory status to this body. It also renames the New Pension System as the National Pension System (NPS).
  
• The members of the PFRDA will include a Chairperson, three whole time members and three part time members. Each of the members shall hold office for a term of five years.
  
• PFRDA will apply to NPS and any other pension scheme not regulated by any other law. It will not apply to (a) Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948; (b) Employees' Provident Fund and Miscellaneous Provisions Act, 1957; (c) Seamen's Provident Fund Act, 1966; (d) Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955; (e) Jammu and Kashmir Employees' Provident Funds Act, 1961 and (f) any other scheme exempt from this Act.
  

Proposed PFRDA Functions

The PFRDA shall perform promotional, developmental and regulatory functions relating to pension funds through regulations or guidelines. Proposed functions include:

• Regulating the NPS;
• Educating the subscribers and the general public on issues relating to pension, and training of intermediaries;
• Adjudicating disputes between intermediaries as well as between intermediaries and subscribers; and
• Establishing mechanisms for grievance redressal of the subscribers.

The main features of the NPS include:

• Every subscriber will have an individual pension account;
• This account shall be portable in case of change of employment;
• The subscriber may choose the allocation of his funds across various pension schemes;
• The amount in the pension account is divided into two tiers. Withdrawals from Tier 1 are not permitted unless it is prescribed by the regulator;
• On attaining the maturity, a minimum amount has to be invested as annuity.

The NPS comprises three main entities:

• Central Recordkeeping Agency (CRA);
• Pension Fund Managers (PFM); and
• Point of Presence agencies (PoPs).

Functions of CRA include maintaining records, accounts and effect all instructions regarding subscription, switching of options and withdrawals by the subscriber. The PFM shall provide a set of schemes with varying risk-return profiles and manage the assets of the subscribers. The PoPs shall receive instructions and contributions from the subscribers, transmit these to the CRA, and pay out benefits to the subscribers.

The Bill empowers the PFRDA to impose penalties and fines for any violation of the provisions of the legislation, rules and regulations. The money collected from the penalties will be credited to the Subscriber Education and Protection Fund.

Last Updated on 12/5/2011