Intending to promote, develop and regulate the pension sector of the economy, the government of India formulated the Pension fund regulatory and development authority of India, or PFRDA, in the year 2003.
The national pension scheme launched the PFRDA in the year 2003 and thereby extended to all citizens in the year 2009. The pension fund regulatory and development authority of India comes under the jurisdiction of the Ministry of Finance.
Let us understand a bit more about this institution in this article.
PFRDA works as a pension regulator and works towards its development and promotion. It is a central autonomous body and a quasi-government organization that has executive, legislative and judiciary powers similar to other major government institutions such as the Reserve bank of India (RBI), the Securities and exchange board of India (SEBI), Insurance regulatory and development authority of India (IRDA) and, Insolvency and bankruptcy code of India (IBBI). PFRDA administers and regulates the National Pension System (NPS) and also administers Atal Pension Yojana.
Some functions of PFRDA are:-
1. Regulate NPS and pension schemes to which PFRDA Act applies
2. Establish, develop and regulate pension funds
3. Protect the interest of pension fund subscribers
4. Register and regulate intermediaries
5. Approve schemes, terms, and conditions, and lay down norms for the management of the corpus of pension funds
6. Establish grievance redressal mechanism for subscribers
7. Promote professional organizations connected with the pension system
8. Settle disputes among intermediaries and also between intermediaries and subscribers
9. Train intermediaries and educate subscribers and the general public about pensions, retirement savings, and related issues
10. Regulate the regulated assets
11. Call for information, conduct inquiries, investigations, and audits of intermediaries and other entities connected with pension funds
The national pension scheme is a defined contribution pension system introduced by PFRDA whereby subscribers’ contributions are collected and accumulated in an individual pension account using various intermediaries. Under NPS, individual contributions are pooled together into a pension fund and are invested as per approved investment guidelines.
Funds are generally invested in diversified portfolios consisting of government bonds, bills, corporate debentures, and shares, based on subscribers’ choice. Subscribers also have an option, at the time of exit, to purchase a life annuity by using an accumulated pension fund. As already mentioned, NPS is governed by PFRDA.
PFRDA also established an NPS trust under the Indian Trust Act, of 1882 to manage assets and funds under NPS in the best interest of subscribers. NPS Trust is managed by a Board of Trustees appointed by PFRDA who is the settlor of the trust. Legal ownership of trust and funds is entrusted to the board of trustees.
The Board consists of a Chairman and up to 5 members including the chairman, and the Board meets once in 3 calendar months. NPS Trust is responsible for executing individual pension accounts in its name with the subscriber, protecting the properties of NPS, safeguarding the interest of NPS and its subscribers, approving various documents and reports including audited financials submitted by various intermediaries of NPS trust, monitoring and evaluating operations of such intermediaries, exit the subscriber from NPS, etc.
PFRDA is not behind in making use of digitization and making pension system operations smooth for its subscribers. PFRDA enables its subscribers to perform the following activities online:
1. Opening of NPS account
2. Contribution to PRAN account except for NPS-Swavalamban and Atal Pension Yojana accounts
3. Activate Tier-II Account i.e., voluntary savings facility which does not have restrictions on withdrawals and also no tax benefit
4. Modification of personal details on the database
5. Modification of investment pattern
6. Change of pension fund except for government subscribers and subscribers of certain corporates
7. Download a statement of a transaction at any time, a physical copy of which is generally dispatched to subscribers once a year and a soft copy periodically to the registered email id
8. Exit/withdrawal requests
9. Lodging of complaint
10. Print e-PRAN
Yes, NPS accounts can be opened online; PFRDA provides online services to open NPS.
Yes, an NPS account can be opened by any person.
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