Know about Pension Fund Regulation and Functions 

PENSION FUNDS: MEANING

It is a fund established by an employer to facilitate and organize the investment for employees’ retirement funds which is contributed by both employer and employees. Pensions are investment pools that pay for an employee’s retirement commitments. Funds are paid by either employee or employers or both. Corporations and all levels of government provide pensions. The fund managers invest these contributions conservatively. The pension fund is a common asset pool that aims to generate stable growth over a long period and provide pensions to employees when they reach the end of their working tenure and commence their retirement. Pension plans provide financial security and stability during their old age.

PFRDA: Pension Fund Regulatory & Development Authority

PFRDA – Pension Fund Regulatory and Development Authority was established with the President’s assent on 19 September 2013. The President was the guardian of PFRDA till Financial Year (FY) 2014-15 and it has become fully autonomous and functions independently from FY 2014-15. Pension Fund Regulatory and Development Authority, a statutory body, is the pension regulator of India which was established by the Government of India on 23rd August 2003 and was authorized by the Department of Financial Services of Ministry of Finance. The body was formed to promote, regulate and develop the pension sector within the country. PFRDA also aims to underline its effort towards financial education awareness as a region of its strategy to safeguard the interest of the subscribers to schemes of pension funds and associated matters. Educating and making people aware of the benefits of the retirement planning and creating awareness about the pension schemes regulated by PFRDA is critical for increasing participation in the voluntary segment of NPS and other pension schemes regulated by PFRDA. The role of an advisory entity would be critical in propagating the schemes to the masses to achieve adequate social security. The National Pension Scheme (NPS) was launched by PFRDA in the year 2003 and thereby extended to all or any sections of citizens in the year 2009.

PFRDA: FUNCTIONS

While the pension system was initially introduced for Government employees, it is now extended to all citizens of India and non-resident Indians including self- employed persons.

The Preamble of the Pension Fund Regulatory & Development Authority Act, 2013 states the Fundamental functions of the PFRDA as –

“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”.

i. Promote the pension schemes within the country by fostering necessary and voluntary pension schemes to serve the income needs of old age and retired personnel.

ii. National Pension System, each tier 1and tier 2 are under the purview of PFRDA.

iii. PFRDA undertakes the activities of appointing various intermediate agencies like Pension Fund Managers, Central Record Keeping Agency (CRA), etc.

iv. Educating the public and stakeholders regarding the importance of pension.

v. Intermediaries need to be trained that perform the task of creating awareness and educating people about the importance of pension.

vi. Addressing grievances associated with various pension schemes in the country.

vii. Addressing and partitioning disputes between various intermediaries like banks and between customers and intermediaries.

STRUCTURE OF THE AUTHORITY

The Authority shall include a Chairperson and not more than six members, of whom a minimum of 3 shall be Whole-Time Members, to be appointed by the Central Government. PFRDA headquarter is located in New Delhi.

INTERMEDIARIES OF PFRDA

The Pension Fund Regulatory and Development Authority is classified into three sub-divisions that performs a task to feature on to the holistic responsibility of PFRDA towards the Indian citizen. These three sub-bodies areas listed below.

Central Record Keeping Agency (CRA)

CRA is an agency registered under PFRDA to perform functions of record-keeping, accounting, administration, and customer service to Pension scheme subscribers. National Securities Depository Limited e-governance infrastructure Ltd (CRA1) is the first CRA appointed by PFRDA and Karvy Computershare Private Limited (CRA2) is the second CRA. In the case of private sector employee pension subscribers, an option is given to the employer to choose between CRA1 and CRA 2 and in case of non-employee voluntary subscribers, the option to choose the CRA is with the subscribers themselves. In the case of government sector subscribers and subscribers registered with Atal Pension Yojana, the respective Government will choose the CRA and in case of NPS-Lite subscribers, it is the aggregator who chooses the CRA.

Central Record Keeping Agency performs the subsequent functions –

i. Systematic and administration of record-keeping of all information of customers who are registered under the National Pension System.

ii. Issuing of PRAN or Permanent Retirement Account Number for customers who have aided savings plan under the National Pension iii. Scheme.

iv. Acting as an operational intermediary between PFRDA and other entities like Pension Funds, Trustee Bank, etc.

v. Monitoring contributions of NPS subscribers and updating various intermediaries about the same.

vi. Furnishing periodic and updated PRAN statements to all subscribers regularly.

vii. The settlement of funds that have been invested and the following units allotted to subscribers.

Pension Fund Managers (PFMs)

The most important functions of the PFMs:-

i. Pension Fund Managers essentially are mandated to invest and manage funds of subscribers enrolled in the National Pension System.

ii. Investment of contribution from the subscriber as per the rules and guidelines of the PFRDA.

iii. Maintain books and records of the investment and flow of funds.

iv. Construction of portfolio of customers who choose auto-allocation of funds.

v. Reporting to PFRDA regularly.

vi. Public disclosure of financial information from time to time as per guidelines issued by PFRDA.

Point of Presence Agencies (PoPs)

PoP is another intermediary registered under PFRDA as a point of presence and has electronic connectivity with the CRA to receive and transmit funds and instructions and payout funds. The third and the most public-facing entity of the PFRDA is the Point of Presence Agencies. The following are the functions that it performs:-

i. Receive and analyses the duly filled application form along with KYC documentation, furnished by customers who register for the NPS scheme.

ii. To verify KYC documents as and when required.

iii. To collect and verify NPS contributions made by subscribers via various channels like cash, Demand Draft, Cheque and so on.

iv. To deduct and collect the NPS application fee and to furnish a receipt of the same to the subscribers.

v. To upload contribution files of subscribers on to the Central Record-Keeping Agency system.

vi. To maintain records of all transactions that happen for various NPS accounts of customers.

vii. Carry out changes in subscriber’s details as per requests made by the subscriber.

viii. Handle requests and complaints with regards to contributions made towards NPS and other such requests.

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