Pension plans are an essential component of any nation’s social welfare system because they give its citizens financial security during their senior years. The Pension Fund Regulatory and Development Authority (PFRDA) in India was established in 2003 with the main goal of promoting, managing, and expanding the nation’s pension industry. The PFRDA was initially established to oversee the pension plans only for government employees. Nevertheless, it later extended its services to all Indian citizens and NRIs, including those who were self-employed.
With the implementation of the PFRDA regulations, the pension sector in India has experienced significant growth and development, presenting better opportunities for people to secure their financial future. In this blog, we’ll look at the PFRDA’s roles, its different pension plans, and how it’s changed the Indian pension industry.
The Evolution of Pension Regulation in India: From IPRDA to PFRDA
The Indian Parliament established the Interim Pension Fund Regulatory & Development Authority (IPRDA) in 2003 with the intention of creating a temporary framework until a thorough and trustworthy system was developed and endorsed by all political parties, including the opposition. The President’s assent led to the establishment of the Pension Fund Regulatory and Development Authority (PFRDA) in 2013, which was a significant turning point for India’s pension regulatory framework. Prior to FY 2014–15, the President served as PFRDA’s guardian; however, following that fiscal year, PFRDA attained full autonomy and is now run independently.
Pension Fund Regulatory and Development Authority (PFRDA) – Promoting Retirement Security in India
The Indian government established the Pension Fund Regulatory and Development Authority (PFRDA) as a statutory body to promote, oversee, and advance the nation’s pension sector.
The PFRDA performs the following main duties:
- Promoting old-age income security: According to the preamble of the PFRDA’s constitution, one of the authority’s main goals is to promote old-age income security by establishing, expanding, and overseeing pension funds.
- Overseeing the National Pension System: PFRDA governs and oversees the National Pension System, including both Tier 1 and Tier 2 pension schemes.
- Encouragement of pension plans: To meet the needs of retired workers for retirement income, PFRDA encourages both mandatory and voluntary pension schemes.
- Hiring intermediaries: The PFRDA is in charge of employing intermediaries to help with the management and expansion of pension funds, including Pension Fund Managers and the Central Record-Keeping Agency (CRA).
- Public education: The PFRDA informs members of the public and other interested parties about the value of pensions and the necessity of retirement planning.
- Training for intermediaries: PFRDA also offers training for intermediaries, who are in charge of informing and promoting people about the importance of pensions.
- Problem-solving: PFRDA handles and settles disputes involving consumers and intermediaries as well as a variety of intermediaries, including banks.
PFRDA is essential to India’s pension industry because it promotes retirement security and financial stability for people all over the nation.
Intermediaries in PFRDA: Understanding the Role of Central Record Keeping Agency (CRA)
A team of intermediaries has been hired by India’s Pension Fund Regulatory and Development Authority (PFRDA) to help with pension fund organization, collection, management, record-keeping, and distribution. The Central Record Keeping Agency (CRA) is an example of such an intermediary. Let’s examine the CRA’s role and responsibilities in more detail.
Appointment of CRAs:- PFRDA has appointed two CRAs to perform record-keeping, accounting, administration, and customer support functions for Pension Fund subscribers: National Securities Depository Ltd. (CRA1) and Karvy Computershare Private Ltd. (CRA2). Employers who have pension-subscribing employees in the private sector have a choice between the two CRAs.
Non-employee voluntary subscribers may decide for themselves which CRA to use. For those who have signed up for the Atal Pension Yojana and government sector employee pensions, the relevant government may select a CRA. Between the two CRAs, the aggregator chooses one for NPS subscribers.
Role of the CRA- As a mediator between PFRDA and the public, the CRA performs various functions, including:
- Helping intermediaries: The CRA serves as a functional interface for carrying out operations, keeping track of information, and managing the data of clients registered with Pension Funds.
- Maintaining records: The CRA issues Permanent Retirement Account Number (PRAN) cards, keeps up with the PRAN database, and monitors subscriber activity.
- Unitization: The CRA makes sure that subscriber contributions made to the Pension Fund are unitized.
- Information gathering: The CRA receives pertinent information from subscribers and compiles it before relaying it to other middlemen, like the Trustee bank.
- Monitoring and oversight: The CRA keeps an eye on and oversees how invested funds are settled and how subscribers are given units.
- Customer support: The CRA offers users a range of services, including call centers for customers, a centralized system for handling grievances, withdrawal requests, and more.
CRA plays a crucial role in facilitating the functioning of the pension system in India. Its role in maintaining records, providing customer support, and acting as a mediator between subscribers and other intermediaries ensures that the pension system is efficient, transparent, and secure.
PFRDA’s Online Services that Facilitate Pension Scheme Investment
A number of initiatives have been launched in India by the Pension Fund Regulatory and Development Authority (PFRDA) to make it simpler for people to invest in pension plans both online and offline. In order to encourage people to research different retirement funds, the regulatory body has established a number of online services.
- Opening a Pension Fund Account Through NPS: Through the PFRDA’s online portal, people can sign up for an account with the National Pension System (NPS), which enables them to make investments and make contributions to the plan.
- Contributions to the PRAN account are being processed (Excluding NPS- Swavalamban and Atal Pension Yojana accounts): PFRDA accepts contributions made by subscribers to their Permanent Retirement Account Number (PRAN), which is used to track and manage their contributions and investments.
- Account activation for Tier 2: Subscribers can activate their Tier 2 account on PFRDA’s online platform, allowing them to make additional voluntary contributions to their pension fund account.
- Updates to subscribers’ personal data: Through the PFRDA website, subscribers can make changes to their personal data, including contact information, nominee information, and bank account information.
- Changes to the investment strategy: Depending on their risk tolerance and investment objectives, subscribers may alter their investment strategy and the distribution of their funds among various asset classes.
- Pension arrangements have been changed: PFRDA’s online portal allows individuals to choose their preferred pension plan and switch between various plans based on their retirement needs.
- Transaction statements can be downloaded and accessed: Subscribers can download and view their transaction statements, which include details of contributions, withdrawals, and fund allocations.
- Requests for departure or withdrawal are processed: PFRDA makes it easier to withdraw money or close an account in accordance with the guidelines of the scheme.
- Filing a complaint: Subscribers can register their grievances or complaints through PFRDA’s online platform, which offers a centralised grievance management system.
- Printing e-PRAN and other documents: Subscribers can print their e-PRAN (Electronic Permanent Retirement Account Number) and other related documents such as transaction statements, annual statements, and account opening forms.
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PFRDA – Pension Fund Regulatory and Development Authority FAQs
What is PFRDA, and what does it do?
PFRDA, or Pension Fund Regulatory and Development Authority, is a regulatory body that the Indian government established to promote and oversee the nation’s pension sector. Its primary goal is to safeguard the interests of pension subscribers, create, expand, and regulate pension funds, and resolve pension fund-related issues in order to promote the security of old-age income.
Who can subscribe to the National Pension System (NPS)?
Any Indian citizen between the ages of 18 and 65, whether they are a resident or not, is eligible to join the NPS. Everyone who works for themselves, for a private company, or for the government is eligible to take part in the NPS.
What are the different types of pension funds regulated by PFRDA?
The National Pension System (NPS) and the Atal Pension Yojana (APY) are the two primary pension fund types that are governed by PFRDA. While the APY is a social security program supported by the government for the unorganized sector, the NPS is a defined contribution pension system accessible to all Indian citizens.
How can I open a pension account with PFRDA?
Depending on which plan you want to enroll in, you can open a pension account with PFRDA by going to either the NPS Trust website or the APY website. To choose a Pension Fund Manager (PFM) to oversee your investments, you must submit your personal and financial information.
What are the tax benefits of investing in a pension scheme regulated by PFRDA?
There are several tax advantages to investing in a pension plan governed by the PFRDA. Section 80CCD(1) of the Income Tax Act permits deductions from taxable income for contributions made to the NPS up to 10% of your salary (up to a maximum of Rs. 1.5 lakh). Furthermore, Section 80CCD(1B) permits a further deduction of up to Rs. 50,000. Section 80CCD(1) of the Income Tax Act allows contributions up to Rs. 50,000 made under the APY to be deducted from your taxable income.