PFRDA: History, Functions, Intermediaries & Online Services
Pension Fund Regulatory and Development Authority (PFRDA) is a regulatory body established in 2003 with its headquarters in New Delhi. The main aim of PFRDA is to promote, regulate and develop the Indian pension sector. 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 the 1st January, 2004. The NPS was subsequently extended to all citizens of the country w.e.f. 1st May, 2009 including self employed professionals and others in the unorganised sector on a voluntary basis.
A brief history on the Formation of PFRDA:
The Government of India has been launching various programs to provide financial support to the country’s senior citizens after retirement. In 2003, the Union Government passed the IPRDA (Interim Pension Fund Regulatory and Development Authority) bill to promote, regulate and develop the pension system 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, State Governments and by employees of private institutions/organisations & unorganised sectors. The PFRDA is ensuring the orderly growth and development of the pension market.
What Are the Functions of PFRDA?
As per PFRDA’s preamble, its main objective is to:”promote old age income security by regulating pension funds, protecting subscribers’ interests to pension fund schemes and matters associated with it or related to that.”
PFRDA administers and regulates the National Pension Scheme (NPS) and the Atal Pension Yojana (APS). Some of the other main functions of the PFRDA (Pension Fund Regulatory and Development Authority) are:
Promote the purchase of retirement policies in the country by reassuring compulsory and voluntary pension schemes to relieve the financial stress of retired persons. This is done by various intermediaries like the Pension Fund & Managers (PFMs), Central Record Keeping Agency (CRA), Retirement Advisor, Trustee Bank, Custodian, etc.
- To manage and administer the National Pension System for both tier 1 and 2 accounts.
- Train intermediaries to perform the task of popularising the necessity of pension policies.
- Educating stakeholders and the general public about the importance of retirement planning and pension policy.
- Addressing and settling disputes between different intermediaries like banks and customers.
- Initiating mechanisms for grievances relating to numerous retirement policies in the country.
- Protecting the interest of a pension fund subscribers
- Approve terms and conditions, schemes, and lay down norms for managing pension fund investments.
- Conduct investigations, inquiries, and audits of intermediaries and other entities related to pension funds.
Who are the Intermediaries under PFRDA?
PFRDA has appointed a group of intermediaries to perform certain functions such as collecting, organising, distributing, managing and record-keeping. The intermediaries under PFRDA are:
- Central Record Keeping Agency (CRA)
Central Record Keeping Agency (CRA) is a registered body under PFRDA responsible for record-keeping, customer services and administrative functions. It is an intermediary certified and registered under sub-section (3) of section 27 of the PFRDA Act, 2013. There are three record-keeping agencies under CRA:
- CRA 1: NSDL e-Governance Infrastructure Limited (NSDL e-Gov)
- CRA 2: KFin Technologies Private Limited (KFintech)
- CRA 3: CAMS or Computer Age Management Services Ltd.
- Functions of Central Record Keeping Agency (CRA)
The functions of the Central Record Keeping Agency (CRA) are:
- Provides customer service, administration and financial record-keeping to contributors under National Pension System (NPS).
- Responsible for issuing IPIN/TPIN and Permanent Retirement Account Number (PRAN) to subscribers registered under the National Pension System (NPS).
- Managing a database of scanned copies of KYC documents.
- Maintaining a centralised grievance system.
- Providing confirmed and periodic Statement of Transactions (SOT).
- Updating change of demographic details, change of scheme etc.
- Providing proper claim processing cells and related functionalities to facilitate the procedure of the requested withdrawal.
- Applicability Under Central Record Keeping Agency (CRA)
The set of subscribers who can choose between CRAs are:
- Private Sector employees who have purchased pension policies.National Pension Scheme contributions with pension policy.
- Non-employee voluntary subscribers.
- Government sector employees with retirement policies enrolled under Atal Pension Yojana.
- Pension Fund (PFs)
These are professional pension fund managers appointed to invest, judiciously and prudently, the pension corpus in a portfolio of securities and manage them. Currently the pension fund managers under NPS are –ICICI Prudential Pension Funds Management Company Ltd., LIC Pension Fund Ltd, Kotak Mahindra Pension Fund Ltd., SBI Pension Fund Private Ltd., UTI Retirement Solutions Ltd, and HDFC Pension Management Co Ltd., Aditya Birla Sun Life Pension Management Limited
- Functions of Pension Funds (PFs)
The functions of Pension Fund Manager (PFMs) are:
- Ensuring investment as per investment guidelines
- Investing the contributions in the schemes as per the instructions provided by CRA.
- Constructing the scheme portfolio.
- Maintenance of books and records, reporting to the Authority and making disclosures.
- Point of Presence (PoP)
Points of Presence are banks and non-banking financial companies etc registered with PFRDA for registration and servicing of the subscribers to the NPS. A PoP is the first point of interaction between the subscriber and the NPS. The registered PoPs have authorised branches called POP-Service providers (PoP-SPs) to act as collection points and extend services to customers. The functions of the PoPs include: subscriber’s registration, processing subscriber contributions, change in personal details, change in investment scheme/ fund manager, processing subscriber shifting from one model to the other, issuing printed account statements, processing of withdrawal/ exit request on superannuation etc.
- Functions of Point of Presence (PoP)
Some of the functions of Point of Presence (PoP) are:
- Analysing registration and verification of KYC documents of the policyholders under the National Pension System (NPS).
- Collecting and authenticating fund contributions by the scheme holders under National Pension System (NPS) in numerous forms like cash, cheques, demand drafts, etc.
- Maintaining financial records of the transactions under this structure.
- Applying deductions and collecting application fees from the contributors under the National Pension System (NPS).
- Uploading and keeping track of fund contributions received on the Central Record Keeping Agency (CRA) System.
- Supervising requests and grievances of the contributors.
- Trustee Bank
The Trustee Bank handles the flow of funds between various intermediaries under NPS. Presently, Axis Bank Ltd is the designated bank to facilitate fund transfers across subscribers, fund managers and the annuity service providers based on the instructions received from the CRA. The Trustee Bank receives funds from the Nodal Offices/PoPs/Aggregators and reconciles it with the Subscriber Contribution File. The Trustee Bank holds the funds in the name of the NPS Trust and the subscribers are the beneficial owners.
- Functions of Trustee Banks
Some of the functions of Trustee Banks are:
- Monitoring and receiving funds for the National Pension System (NPS) via regional and zonal offices from all over the country.
- Settling finances with various entities by transferring funds and securities.
- Returning fund transfers with discrepancies to the regional or zonal office or bank and correcting the same.
- Verifying the details of the amount paid by the regional and zonal offices.
- Reconciling daily financial balances as per Central Record Keeping Agency (CRA).
- Managing contribution records by nodal and regional offices and other documents relating to the same.
- Preparing information on Fund Receipts by consolidating all corpus received by the National Pension System (NPS).
The securities purchased from NPS corpus in the name of the NPS trust are held by the Custodian of Securities, who also facilitates securities transactions by making and accepting delivery of securities. The PFRDA has appointed the Stock Holding Corporation of India Ltd as the Custodian.
- Functions of Custodian
The important functions of the Custodian are:
- Having Custody of the Securities held in the name of NPS Trust, purchased out of NPS Corpus.
- Maintaining details of securities held.
- Collecting the benefits like dividend, rights, bonus etc. on securities.
- Informing about the actions of the issuers of securities held that may impact the benefits.
Aggregators are entities registered by PFRDA who act as the only link between the Subscriber and National Pension System.
- Functions of Aggregator
The important functions of aggregators are:
- Taking responsibility for conveying changes in the contributor’s database.
- Processing the investment made by the fundraiser to NPS-lite or Swavalamban.
- Supervising immediate requests and grievances of the investors.
- Nodal Offices
Nodal offices are registered intermediaries that play a major role in reaching the masses regarding the National Pension System (NPS) schemes. The Central Government performs this role on a large scale, whereas the State Governments play this role on a lower scale.
- Annuity Service Provider (ASP)
Annuity Service Provider is a registered body under PFRDA carrying out annuity payments to subscribers. The body regulates and maintains a fund from where periodic annuity payments are made per the contributor’s chosen annuity contract.
- Retirement Advisor
Retirement Advisor is a registered intermediary in the form of a person spreading education and awareness about the National Pension System (NPS) and other such schemes. Additionally, they encourage individuals to invest in pension policies and simultaneously help to solve their doubts and queries about the same.
What Are the Online Services Provided by PFRDA?
The Pension Fund Regulatory and Development Authority (PFRDA) initiates numerous online and offline measures in order to provide easy facilities for people so that they can invest in pension schemes. Some of the actions taken online are:
- Opening a bank account for pension funds under the National Pension System (NPS).
- Online activation of a Tier 2 account, which is a voluntary savings facility without withdrawal restrictions, however doesn’t provide any tax benefits.
- Processing investments to PRAN account by not including Atal Pension Yojana and NPS – Swavalamban accounts.
- Modifications to the investment strategy.
- Online modifications in personal details and basic information of the fund provider.
- Processing departure or withdrawal requests.
- Easy downloading of transaction statements and providing the same to contributors once a year through hard copy and periodically to their registered email id.
- Online filing of complaints and grievances.
- Simple accession of e-PRAN or other documents related to the pension policy.
- Changing pension funds with exceptions to government investors and certain corporate contributors.
The main objective of PFRDA is to create awareness among individuals to invest in pension policies. This ensures adequate financial security to individuals during their old age. The authoritative body further divides its roles and responsibilities among its intermediaries.
Frequently Asked Questions
What is the PFRDA Bill?
PFRDA Bill was a registered bill introduced in 2011 to provide legal status to the interim Pension Fund Regulatory and Development Authority body. This bill introduced the powers, duties and responsibilities of this authority. Moreover, it provided a structure for the old-age pension system in India.
What is NPS Trust?
NPS Trust was recognised by the Pension Fund Regulatory and Development Authority under the Indian Trusts Act, 1882. This was established as an intermediary to monitor and regulate funds under the National Pension System (NPS).
What is NPS?
National Pension System (NPS) is a Defined Contribution Pension System (DCPS) under the Employee-based Pension Plans. Here, the employer and employee build a pension wealth payable during the retirement of the employee through annuity and lump-sum withdrawal.