PFRDA – Pension Fund Regulatory and Development Authority

The Government of India has initiated many programs for the senior citizens of the country for their financial upliftment and fixed monthly pensions after retirement over the years. In the year 2003, IPRDA (Interim Pension Fund Regulatory and Development Authority) bill was passed by the Parliament with the purpose to promote, regulate, and develop Pension System in India. After all the approvals, an improved version of IPRDA, that is, PFRDA (Pension Fund Regulatory and Authority), was launched as a permanent Act in the year 2013.

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PFRDA Purpose

Initially, the PFRDA (Pension Fund Regulatory and Development Authority) was launched only for the Government employees of the country. In the later stage, the services were extended to all the citizens of India, including the Non-Resident Indians (NRIs) and the self-employed citizens. The main agenda behind the PFRDA launch was to promote, expand, and regulate the pension industry in India.

Functions of PFRDA

Headquartered in New Delhi, the PFRDA also regulates and administers the National Pension Scheme (NPS) and the Atal Pension Yojana (APY) schemes. Here are some critical functions related to the Pension Fund Regulatory and Development Authority (PFRDA):

  • To protect pension fund subscriber’s interest

  • Promote, Regulate, and Develop pension funds

  • Tier-I and Tier-II of the National Pension Scheme is governed under the PFRDA

  • To promote the purchase of pension schemes in order to cater to senior citizen’s financial needs

  • PFRDA helps in educating the citizens about the importance of pensions in old age

  • Addresses any grievances related to pension schemes

  • Resolves disputes between various intermediaries

  • Train and inform intermediaries about the pension schemes and their functioning

 Intermediaries of PFRDA

The PFRDA appoints different intermediaries to carry out various purposes like,

  • Collection

  • Organization

  • Distribution

  • Management

  • Record-keeping

Following are the intermediaries of the Pension Fund Regulatory and Development Authority (PFRDA):

  1. Central Record Keeping Agency (CRA)

    Central Record Keeping Agency, as the name suggests, is an agency under PFRDA that maintains accounting, record-keeping, administration, and customer service of the National Pension Scheme. 2 record keeping agencies appointed by the PFRDA are:

    • National Securities Depository Limited e-governance Infrastructure Limited (CRA 1)

    • Karvy Computershare Private Limited (CRA 2)

    CRA Applicability

    • The employer can choose between CRA 1 or CRA 2 in the case of private sector employee pension subscribers.

    • Either one of the CRAs can be opted for by the non-employee voluntary subscribers.

    • Either one of the CRA’s can be opted for by the aggregator for National Pension Scheme subscribers.

    • Government can choose between CRA 1 or CRA 2 in the case of government sector employee pension subscribers Atal Pension Yojana subscribers.

    Functions of CRA

    • CRA keeps all the records and administers all the customers registered under the NPS (National Pension Scheme).

    • They are responsible for issuing PRAN (Permanent Retirement Account Number) to all the NPS customers.

    • CRA manages contributions made by PRAN subscribers and updates intermediaries about the same.

    • Periodically updates the PRAN records and also offers a grievance management system.

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  2. Pension Fund

    Another intermediary of PFRDA (Pension Fund Regulatory and Development Authority), pension funds have been granted the authority of collection, organization, etc., like all the other intermediaries.

    Functions of Pension Fund

    • Subscriber fund collections

    • Offers risk management committee

    • Maintains pension fund scheme records

    • Pension fund manager Periodically updates and reports to the PFRDA.

    • Declaring NAV (Net Asset Value) to PFRDA

    Point of Presence

    PoP is another important public facing entity under the PFRDA that connects with the CRA electronically and works on the purpose of

    • Receiving

    • Transmitting

    • And Payouts of the funds.

    Functions of Point of Presence

    • Analyze the KYC Documents of the NPS scheme holders.

    • Collects and verifies contributions by the NPS holders in various forms like cash, DD (Demand Drafts), cheques, etc.

    • Uploading of contributions received on the CRA System

    • Applying deductions and collection of application fees from the NPS scheme holders

    • Maintaining records for all the transactions under the scheme

    • Handling grievances and requests of the contributors 

  3. Trustee Bank

    Responsible for the everyday flow of funds, trustee banks are also intermediaries of PFRDA. Axis Bank is the trustee bank under National Pension Scheme by the Pension Fund Regulatory and Development Authority (PFRDA).

    Functions of Trustee Bank

    • Receiving funds from all the regional and zonal offices

    • Verifying the details

    • They transfer of funds correctly

    • Trustee bank maintains fund receipt information

    • Reconciling daily balance sheets with CRA

  4. Custodian

    The following functions are performed by the custodian:

    • Keeping the assets or securities safely that are held under the NPS

    • Collection of benefits on these assets

    • Acts as a domestic depository

    • The Custodians are well informed about any action taken by the issuer of securities.

    • Reconciles and maintains all the records

  5. Nodal office

    To make the NPS scheme reach the masses, nodal offices play an important and vital part. Central and State Government nodal offices connect with the CRA on the customer’s behalf to carry out various purposes of the NPS. Central Government performs this function on a larger level, whereas the State Government is comparatively at a lower level.

  6. Aggregators

    Aggregators are considered to be the primary POC (Point of Contact) between the NPS and the scheme contributor under NPS Lite or Swavalamban.

    • The aggregator is responsible for making any changes in the KYC documents of the contributors if and when required.

    • They also handle complaints in case the subscriber has any grievances.

Online Services Offered by PFRDA

Pension Fund Regulatory and Development Authority helps their customers and simplifies the process of pension scheme investment, both online as well as offline.

Following are the online services offered by the PFRDA that makes life after retirement easier:

  • One can open an NPS account online easily.

  • Contributions towards PRAN can be made online (Excluding Atal Pension Yojana and NPS – Swavalamban).

  • Tier 2 accounts can be activated online.

  • Changes in the basic information related to the contributor can be done online.

  • Any changes to be made in investment strategies.

  • Transactions done can easily be tracked.

  • Withdrawal requests can be processed.

  • Any complaint or grievances can be filed online.

  • e-PRAN or any other relevant document related to the pension scheme can be accessed easily.

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^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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