Pension fund Regulatory and Development Authority Role and Functions

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, Government of India introduced a new Defined Contribution Pension System for the new entrants to Central/State Government service, except to Armed Forces, replacing the existing system of Defined Benefit Pension System. On 23 August 2003, Interim Pension Fund Regulatory & Development Authority (PFRDA) was established through a resolution by the Government of India to promote, develop and regulate pension sector in India. The contributory pension system was notified by the Government of India on 22 December 2003, now named the National Pension System (NPS) with effect from 1 January 2004. The NPS was subsequently extended to all citizens of the country w.e.f. 1 May 2009 including self-employed professionals and others in the unorganized sector on a voluntary basis.

The Pension Fund Regulatory & Development Authority Act was passed on 19 September 2013 and the same was notified on 1 February 2014. PFRDA is regulating NPS, subscribed by employees of Govt. of India, State Governments and by employees of private institutions/organizations & unorganized sectors. The PFRDA is ensuring the orderly growth and development of pension market.

Role and Functions

The preamble of PFRDA states that the aims of the authority is – “to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto.”

PFRDA is head-quartered at New Delhi with various regional offices spread across the country.

• Promote pension scheme in the country by fostering mandatory as well as voluntary pension schemes in order to serve the old age income needs of retired personnel
• National Pension System, both tier 1 and tier 2 are under the purview of PFRDA and are dictated by the same
• PFRDA performs the function of appointing various intermediate agencies like Pension Fund Managers, Central Record Keeping Agency (CRA) etc.
• Educating the general public and stakeholders about the importance of pension.
• Training of intermediaries that perform the task of popularizing and educating people about the importance of pension.
• Addressing grievances related to various pension schemes in the country.
• Addressing and resolving disputes between various intermediaries like banks and between customers and intermediaries.

Central Record Keeping Agency (CRA)

• Administration and record-keeping of all information of customers who are registered under the National Pension System
• Issuing of PRAN or Permanent Retirement Account Number for customers who have availed savings plan under the National Pension Scheme
• Acting as an operational intermediary between PFRDA and other entities like Pension Funds, Trustee Bank etc.
• Monitoring contributions of NPS subscribers and updating various intermediaries about the same
• Furnishing periodic and updated PRAN statements to all subscribers on a regular basis
• Overseeing the settlement of funds that have been invested and the subsequent units allotted to subscribers

Pension Fund Managers (PFMs)

Listed below are some of the most important functions of the PFMs.

• Pension Fund Manager essentially are mandated to invest and manage funds of subscribers enrolled in the National Pension System
• Investment of contribution of subscriber as per rules and guidelines of the PFRDA
• Maintain books and records of the investment and flow of funds
• Construction of portfolio of customers who choose auto-allocation of funds
• Reporting to PFRDA on a regular basis
• Public disclosure of financial information from time to time as per guidelines issued by PFRDA

Point of Presence Agencies (PoPs)

The third and the most public-facing entity of the PFRDA is the Point of Presence Agencies. Following are the functions that it performs.

• Receive and analyse the duly filled application form along with KYC documentation, furnished by customers who register for the NPS scheme
• To verify KYC documents as and when required
• To collect and verify NPS contributions made by subscribers via various channels like cash, Demand Draft, cheques and so on
• To deduct and collect NPS application fee and to furnish receipt of the same to the subscribers
• To upload contribution files of subscribers on to the Central Record-Keeping Agency system
• To maintain records of all transactions that happen for various NPS accounts of customers
• Carry out changes in subscriber details as per requests made by subscriber
• Handle requests and complaints with regards to contributions made towards NPS and other such request

Trustee Bank

This is also one of the intermediaries of PFRDA. Following are the tasks that this agency performs

• Receives funds for NPS from all over the country via zonal and regional offices
• Verifies amounts paid by the zonal offices
• Fund transfers with discrepancy are returned to zonal office or bank involved and correct transfers are sought
• Prepares Fund Receipt Information by consolidating all funds received to NPS
• Transfer funds according to instructions by CRA for settlement of funds for various entities
• Reconcile daily balances in accordance with CRA
• Maintain records of contributions by nodal offices and other documents pertaining to the same

Custodian

• Does the job of maintaining accounts of securities and assets held by customers
• Collecting accrued benefits on securities and assets
• Acting as a Domestic Depository and performing functions related to the same
• Informing about the actions that are to be taken or have been taken by issuer of securities
• Maintains and reconciles records of services