PFRDA ACT, 2013

For Malayalam Lecture: https://youtu.be/53WD3wQJOy4
Course: CMA Intermediate, G1
Subject: Laws and Ethics
Topic: Pension Fund Regulatory and Development Authority Act, 2013
Faculty: Asst. Prof. Mohammed Shafath KM (Managing Director, Capred CMA Campus)

Different pension Schemes
National Pension System (NPS)
Point of Presence (POP)
Central Recordkeeping Agency (CRA)
Pension Fund Manager
Section 20 to section 26
Previous year Question discussion

What is NPS? Basic features of NPS. What is CRA. Functions of CRA. NSDL. Functions of NSDL. what is POP? Functions of POP? What is pension Fund? Functions of PF Manager. At present, How many Pension Fund Managers are there in India? 8 Pension Fund Managers in India.

1. Study Note 13 PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY ACT, 2013 Asst. Prof. Mohammed Shafath K M MBA | UGC NET | CMA Inter

2. Why PFRDA?????????

3. How it’s work????????????? POP Point of Presence CRA Central Recordkeeping Agency Pension Fund Manager Employee (Govt/other) Defined Contribution & Instructions Invest in Govt. Securities or Minimum assured returns Contribution NSDL Local Bank Branch or Nearest bank Instructions Instructions There are 8 PF Managers There are 3 entities in relation to PFRDA

4. Employee (Govt/other) Open 2 A/c Tier I A/c Non withdrawable Tier II A/c Withdrawable 25% PRAN (Permanent Retirement Account Number) CENTRAL RECORDKEEPING AGENCY (NSDL) Tier I A/c + Tier II A/c Accumulated Balance + Interest XXXXX (Total Pension Fund Under NPS) Withdrawable Pension as Annuity plans under NPS Operations………..

5. Timeline of PFRDA

6. INTRODUCTION The Act Extends to whole of India . It Includes 10 chapters and 56 sections. Section Particulars Sec 20 NPS Sec 21 CRA Sec 22 POP Sec 23 PF Sec 24 Restriction on foreigners Sec 25 Prohibition of Investment in outside India Sec 26 Eligibility Norms

7. NATIONAL PENSION SYSTEM [Section 20] The contributory pension system notified by the Government of India on 22 nd December 2003, now deemed to be the NPS with effect from the 1 st day of January 2004 . Basic features of NPS every subscriber shall have an individual pension account under the NPS. Withdrawals, (25% of the contribution), may be permitted from the individual pension account subject to the conditions (purpose, frequency & limits may specify by regulations). The functions of recordkeeping, accounting and switching of options by the subscriber shall be affected by the central recordkeeping agency . There shall be a choice of multiple pension funds and multiple schemes : Provided that— The subscriber shall have an option of investing up to hundred per cent of his funds in Government Securities ; and The subscriber, seeking minimum assured returns, shall have an option to invest his funds in such schemes providing minimum assured returns as may be notified by the Authority.

8. e) There shall be portability of individual pension accounts in case of change of employment . f) Collection and transmission of contributions and instructions shall be through points of presence to the central recordkeeping agency . g) There shall not be any implicit or explicit assurance of benefits except market-based guarantee mechanism to be purchased by the subscriber. h) A subscriber shall not exit from NPS except as may be specified by the regulations. i ) At exit , the subscriber shall purchase an annuity from LIC in accordance with the regulations.

9. CENTRAL RECORDKEEPING AGENCY [Section 21] The Authority shall, by granting a certificate of registration, appoint a CRA. Provided that the Authority may, in public interest, appoint more than one CRA. Indian CRA is National Securities Depository Limited (NSDL). Functions of CRA Receiving instructions from subscribers through the points of presence. Transmitting such instructions to pension funds Effecting switching instructions received from subscribers. Discharging such other duties and functions .

10. All the assets and properties owned, leased or developed by the CRA, shall upon expiry of certificate of registration or earlier revocation, Authority shall be entitled to take over the regulated assets, either by itself or through an administrator or a person nominated by it in this behalf. CRA shall be entitled to be compensated the fair value, to be ascertained by the Authority. Where the earlier revocation is based on violation of the provisions of this Act or regulations, unless otherwise determined by the Authority, the CRA shall not be entitled to claim any compensation in respect of such regulated assets.

11. POINT OF PRESENCE [Section 22] The Authority may, by granting a certificate of registration, permit one or more persons to act as a point of presence. Local Bank Branches or other Financial Institutes are the POP. Functions of POP Receiving contributions and instructions Transmitting them to the Trustee Bank or the CRA, as the case may be, Paying out benefits to subscribers from time to time in this regard. A point of presence shall function in accordance with the terms of its certificate of registration and the regulations made under this Act.

12. PENSION FUNDS [Section 23] The Authority may, by granting a certificate of registration, permit one or more persons to act as a pension fund. Functions of PF Manager Receiving contributions Accumulating them Making payments to the subscriber. The number of pension funds shall be determined by regulations and the Authority may, in public interest, vary the number of pension funds (There are 8 PF Managers in India). At least one of them shall be a Government company.

13. The pension fund shall function in accordance with the terms of its certificate of registration and the regulations made under this Act. The pension fund shall manage the schemes in accordance with the regulations. At present there are 8 Pension Fund Managers. they are: SBI Pension Fund Ltd. UTI Retirement Solutions Ltd LIC Pension Fund Ltd HDFC Pension Management Co. Ltd. ICICI Prudential Pension Fund Management Co. Ltd. Kotak Mahindra Pension Fund Ltd. Reliance Capital Pension Fund Ltd. Birla Sunlife Insurance Ltd.

14. Certain restrictions on foreign companies or individual or association of persons [Section 24] The aggregate holding of equity shares by a foreign company either by itself or through its subsidiary companies or its nominees or by an individual or by an association of persons, whether registered or not under any law of a country outside India taken in aggregate in the pension fund shall not exceed 26% of the paid-up capital of such fund or such percentage as may be approved for an Indian insurance company under the provisions of the Insurance Act, 1938, whichever is higher . Thus, it is 49%.

15. Prohibition of investment of funds of subscribers outside India [Section 25] No pension fund shall, directly or indirectly invest outside India , the funds of subscribers. Eligibility norms of the central recordkeeping agency, etc. [Section 26] The central recordkeeping agency, points of presence and pension funds, shall satisfy the eligibility norms as may be specified by the regulations, including minimum capital requirement, past track record including the ability to provide guaranteed returns, costs and fees, geographical reach, customer base, information technology capability, human resources, and such other matters.

16. Let’s Crack it Questions from this Study note which are previously asked in the CMA Intermediate exams Term & Year About Question No. Question Type Mark December 2017 Individual Pension A/c 1 (a) (vi) MCQ 1 Withdrawal of NP Fund 4 (b) Essay 5 June 2018 CRA 4 (b) Essay 7 June 2019 Features of NPS 4 (b) Essay 8

17. Thank you Asst. Prof. Mohammed Shafath K M MBA | UGC NET | CMA Inter