PFRDA – Pension Fund Regulatory and Development Authority

What is PFRDA?

Pension Fund Regulatory and Development Authority is a regulatory body which was established in 2003 with an aim of promoting, regulating and developing the pension sector in India. Initially, PFRDA was formulated for Government sector employees only but gradually, its services extended to all citizens of India and NRIs including self-employed individuals. 

Application of Pension Fund Regulatory & Development Authority

While examining the reports under the OASIS (Old Age Social and Income Security), the need of a single authority was felt to establish a fool-proof system which is accepted by all political parties. Then came PFRDA as a pension regulator which works to promote and develop pension funds. 

It is also known as a central autonomous body having legislative, executive and judicial powers as that of other regulators of financial services in India – Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA) and Insolvency & Bankruptcy Board of India (IBBA).

Functions of PFRDA

Given below are some key functions performed by the Pension Fund Regulatory and Development Authority in India:

• Focuses on promoting pension schemes in order to secure and serve the old age financial needs of retired persons on a sustainable basis
• Regulates the pension schemes to which PFRDA Act is applicable- NPS and Atal Pension Yojana
• Fosters NPS- Tier 1 & Tier 2 for the benefit of the subscribers
• Designates varied intermediate agencies such as Pension Fund Managers, Central Record Keeping Agency etc.
• The preamble formulates public notices to spread awareness about importance of pension schemes
• Initiates grievances portals and redressal mechanism for the pension subscribers
• Trains intermediaries about educating, popularizing, resolving queries of individuals for retirement related instruments & plans
• Works on settlement of disputes among the intermediaries and also between intermediaries & subscribers

Intermediaries under PFRDA and NPS Trust

As already mentioned above, PFRDA has appointed a set of intermediaries for the purpose of organising, collecting, managing, record keeping and distribution of funds. Here is an insight into the intermediaries:

Central Record Keeping Agency (CRA)

This intermediary functions around record keeping, accounting, administrating and delivering customer service to the subscribers of Pension Fund. There are two CRAs appointed by PFRDA for the specified functions- National Securities Depository Ltd. (CRA1) and Karvy Computershare Private Ltd. (CRA2). 

1. Respective employers of Private Sector employee pension subscribers have an option to choose between the two CRAs
2. Non-employee Voluntary Subscribers have an option to choose between the two CRAs by themselves
3. For government sector employee pension subscribers and subscribers enrolled under Atal Pension Yojana, the respective Government has the option to choose CRA
4. For NPS subscribers, the aggregator makes the choice between the two CRAs

Now, here is an overview of the role of CRA as an intermediary between by PFRDA:

• Facilitates all the intermediaries as an operational interface to accomplishing the operations, keeping records and administering the information of customers enrolled under Pension Funds
• Issues PRAN card, maintains the PRAN database and keeps track of transactions related to the subscribers
• Makes sure of unitization of the contribution made by the subscribers in favor of the Pension Fund
• Receives & collects relevant information from the subscribers and mediates the same to other intermediaries such as the Trustee bank
• Monitors and oversees the the settlement of invested funds and allocation of units to the subscribers
• Offers various facilities such as customer call centres for subscribers, centralised grievance management system, withdrawal requests etc. for the subscribers

Pension Fund & Managers

Pension Fund is an intermediary which has been permitted with Certificate of Registration by the PFRDA. It is authorised to collect & receive contributions, invest them and pay the subscribers in a specified manner. Let us analyse the overall functions of Pension Fund:

• Pension Fund collects the funds from subscribers (the ones who have specified their investment choice and the ones who have selected automatic allocation of funds) from the administrator bank for further investment purposes
• It regularly manages and maintains the accounts of the subscribers of National Pension Scheme using bookkeeping methods
• Establishing the investment and risk management committee for the subscribers
• Declaring and Communicating the Scheme NAV (Net Asset Value) everyday to the Central Record Keeping Agency (CRA) for the purpose of unitisation- consolidation of several units into single unit, in PRAN of the subscriber
• Keeping the NPS trust updated with regular reports of operational activities

Point of Presence (PoP)

PoP is the next intermediary under PFRDA which deals under public welfare. Given below are the functions performed by PoPs:

• Oversees the registration and verification of KYC documents of Individuals in Pension Funds
• Processes initial contributions
• Processes different changes in the details of the subscribers on to the record-keeping agency system of CRA
• Records and Uploads the consumer & intermediary grievances in the Central Grievance Management System (CGMS) of CRA
• Accepts contributions from the subscribers and transmits the same to the trustee bank

Trustee Bank

Trustee Bank refers to a bank which is responsible for the day-to-day flow of funds, providing banking services, receiving NPS funds from all nodal offices and remitting the same to intermediaries. PFRDA has appointed Axis Bank as the trustee bank from 1st July 2015; the appointment is valid for 5 consecutive years subject to final review by the Pension Fund Regulatory Authority. Trustee Bank performs the following functions:

• Receives and monitors funds for NPS from all over the country through online and physical portals
• Ensures proper verification of the amount collected from nodal offices
• Verifies the funds paid to subscribers
• Organises fund receipts
• Prepares consolidated report with records of contributions made on daily basis
• Diligent transfer of funds as per the instructions laid down by CRAs

Custodian

Custodian, as an intermediary, ensures the safety of funds, securities or assets under NPS or other Pension Funds. The functions of a Custodian are as follows:

• Monitors the assets and securities held by customers
• Collects benefits on securities and assets on accrual basis
• Acts as a Domestic Depository
• Ensures the provision of incidental services which includes maintenance of accounts
• Mediating the information about all the actions taken by the issuer of securities

Aggregator

Aggregator takes relevant actions related to subscriber interface functions under NPS-lite or Swavalamban. More functions of Aggregator under PFRDA are:

• Takes the responsibility of conveying changes in subscriber’s database as requested by the subscriber
• Processes the contribution to NPS-lite or Swavalamban
• Ensures immediate redressal of grievances

Annuity Service Provider (ASP)

Annuity Service Provider works on the task of annuity payments carried out to subscribers at the time of exit from a fund and periodic annuity payments as per the annuity contract selected by the subscriber.

• Addresses grievances and queries of subscribers related to payment of annuity
• Carries out the registration process for annuity purchase
• Immediate redressal of customers who have purchased annuity

Retirement Advisor

Retirement Advisor can be any person appointed by PFRDA for the purpose of educating and awaring individuals about NPS and other pension schemes.

• Spreads awareness about the importance of Pension schemes
• Encourages individuals to contribute and invest in pension funds
• Solves queries and doubts regarding NPS, APY etc.

What are the online Services offered by PFRDA?

Pension Fund Regulatory & Development Authority has taken several measures online as well as offline to facilitate the individuals willing to invest in Pension Schemes. There are numerous online services offered by the regulatory body which eventually encourages the consumers to seek different retirement funds-

• Opening Pension Fund account under NPS
• Processing contributions to PRAN account (Excluding NPS- Swavalamban and Atal Pension Yojana accounts)
• Activation of Tier-2 account
• Modification of personal details of subscribers
• Investment plan modification
• Change of pension plans
• Downloading and accessing transaction statements
• Processing exit or withdrawal requests
• Complaint filing
• Printing e-PRAN and more

Frequently Asked Questions

Q.1: What is PFRDA Bill?

Ans: PFRDA, as an interim authority, was established in 2003. And, PFRDA Bill was actively introduced in 2011 to give statutory status to the interim PFRDA. This bill defines the powers, duties and responsibilities of Pension Fund Regulatory and Development Authority. Moreover, it gave a structure to the old age pension system in India.

Q.2: When was PFRDA established?

Ans: PFRDA was established as an interim Pension Regulatory Authority in 2003 but declared a statutory body in 2011.

Q.3: What is NPS Trust?

Ans: NPS Trust was established by PFRDA under the Indian Trusts Act, 1882 and appointed as an intermediary responsible for monitoring and taking care of funds under NPS.

Read More: NPS- Eligibility, Functions, How to Invest and more

Q.4: Which authority regulates national pension scheme?

Ans: National Pension Scheme is a pension fund regulated by the Pension Fund Regulatory & Development Authority in India.