What is PFRDA? - Pension Fund Regulatory & Development Authority

In 1999, the government of India commissioned a national project called OASIS – Old Age Social and Income Security to examine the policy related to income security of the old aged. Based on the OASIS report's recommendations, the government introduced a new Defined Contribution Pension System for the government employees except for the armed forces. It replaced the old Defined Benefit Pension System.To develop and regulate the pension sector in India and safeguard the financial security of the old aged, the government formed a new body named Interim Pension Fund Regulatory and Development Authority through a resolution in August 2003. The GOI notified the contributory pension system in December 2003, which is now known as the NPS (National Pension System).Initially, until 2009 the NPS was limited only to the government employees, but later it was extended to all, including self-employed professionals and others working in the unorganised sector on a voluntary basis. And, to regulate the NPS, in 2103, the GOI passed the Pension Fund Regulatory and Development Authority Act, and it came into effect in February 2014. Today, PFRDA regulates the NPS, and it comes under the jurisdiction of the Ministry of Finance.The PFRDA has its headquarters in New Delhi, and it has many regional offices across India.

The preamble of PFRDA states that the objective of the statutory body is – "to promote old age income security by establishing and regulating funds, protection of the interest of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto."

• The primary function of PFRDA is to promote pension schemes in India by fostering compulsory and voluntary pension schemes among the old aged and retired personnel and help them take care of their income needs.
• Facilitate and overlook the operations of both the types of NPS – tier 1 and tier 2 .
• Appoint various intermediate agencies like CRA (Central Record-Keeping agency), PFMs (Pension Fund Managers).
• Train the intermediaries to popularise and educate people about the importance of pension.
• Educate the public and create awareness among the importance of investing in pension funds.
• Address and resolve issues between intermediaries and NPS subscribers.

The PFRDA is divided into three sub-divisions, and each of these divisions performs a specific set of tasks. The three intermediaries appointed by the PFRDA, include – CRA, PFMs and PoPs.

Central Record Keeping Agency (CRA)

The CRA is responsible for carrying out the following functions:

• Administration and record-keeping of all the NPS subscribers related information.
• Issuing PRAN (Permanent Retirement Account Number) to the NPS subscribers.
• Act as an intermediary between PFRDA and other entities like Trustee Bank and Pension Funds.
• Monitor the contributions of NPS subscribers and update the intermediaries about the same.
• Provide PRAN statements periodically to all subscribers to the National Pension System.
• Overlook the settlement of funds invested by the subscribers and allot units to them.

Pension Fund Managers (PFMs)

The PFMs are responsible for carrying out the following functions:

• Invest and manage the funds of NPS subscribers.
• Invest the contributions of subscribers as per the PFRDA guidelines.
• Maintain records of the investments and the flow of funds.
• Construct the portfolio of NPS subscribers who choose auto-allocation of funds.
• Disclose financial information to the NPS subscribers periodically as per the PFRDA guidelines.

Point of Presence Agencies (PoPs)

PoPs are one of the critical intermediaries of the PFRDA as they face the public directly. They carry out the following functions:

• Receive, and review the application forms and the KYC (Know Your Customer) documents provided by NPS subscribers.
• Verify the authenticity of KYC documents as and when needed.
• Deduct and collect the NPS application fee and provide a receipt of the same to the subscribers.
• Upload the NPS subscribers' files to the CRA system.
• Maintain records of all the transactions of all NPS subscribers' accounts.
• Assist the subscribers in making changes to their NPS account as per the PFRA guidelines.
• Handle requests, queries, and complaints of the NPS subscribers regarding contributions, withdrawals, exit from NPS etc.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.