Pension Fund Development and Regulatory Act, 2013: Pioneering Future of Citizens

The Pension Fund Development Authority was initially established in 2003 to introduce a new restructured pension system that entrants to Central Government Service. This new pension scheme was popularly known as the National Pension Scheme. This scheme was made available voluntarily for everyone, including self-employed professionals and workers in the unorganised sector.

The Interim Authority was set to regulate, promote and ensure the orderly growth of the pension market. However, various legislations govern the Pension system in India. The PFRDA got a new structure and power in 2014 after enacting the Pension Funds and Regulatory Development Act, 2013.

Pension Fund Regulatory and Development Authority Act, 2013

The Pension Fund Regulatory and Development Authority Act, 2013, got enacted to establish an authority to promote old age income security to establish, develop and regulate pension funds. Thus, it protects the interest of subscribers of the schemes of the pension funds and the pension related to pensions.

Applicability of the PFRDA Act, 2013

The PFRDA Act, 2013 applies to the National Pension System and any other pension scheme not regulated by any other enactment.

Pension Fund Regulatory and Development Authority

The Pension Fund Regulatory and Development Authority Act, 2013 establishes Pension Fund Regulatory and Development Authority (PFRDA) under section 3. The Pension Fund Regulatory Authority has its seal and the power to acquire, hold and dispose of property (property here includes both movable and immovable property). In addition, the Authority gets empowered to contract in its name and can sue and get sued.

Composition of the PFRDA

Section 4 of the Pension Fund Regulatory and Development Authority Act, 2013 provides the composition of the Authority.

The Central Government appoints the members of the Authority. The PFRDA consists of the Chairperson, three whole-time members, and three part-time members. The people appointed by the Central Government are those of ability, integrity, and standing and possessing knowledge and experience in economics, finance, or law with one person from each discipline.

The term of office of the Chairperson is five years. However, no person can hold an office as Chairperson after the age of sixty-five years.

Further, no person can hold an office after attaining the age of sixty-two years as a whole-time member, and a part-time member cannot hold his office for more than five years.

Powers of the chairperson of the PFRDA

Section 8 of the Pension Fund Regulatory and Development Authority Act, 2013 empowers the Chairperson with Administrative powers. Thus, the Chairperson of PFRDA gets empowered with general superintendence and directions related to the administrative matters of the authority.

Duties, powers, and functions of the Authority

Section 14 of the Provident Fund Regulatory and Development Authority Act, 2013 provides that the Authority is duty bound to regulate, promote and ensure orderly growth of the National Pension System and pension scheme. Also, the PFRDA works to protect the interest of the subscriber of the system and scheme.

Functions of PFRDA

Section 14 of the Pension Fund Regulatory and Development Authority Act, 2013 provides the following functions of PFRDA :

• To regulate the National Pension System and the Pension Scheme.
• To approve the schemes, the terms, and the conditions of such schemes. The PFRDA aims to provide the norms to manage the corpus of the pension fund, including the investment guidelines of the schemes.
• To register and regulate the intermediaries.
• To issue a certificate of registration to an intermediary upon application. The Authority also renews, modifies, withdraws, suspends, and cancels the registration.
• To protect the interest of the subscribers. The Authority protects the subscriber’s interest by ensuring the safety of the subscribers’ contributions to various pension fund schemes. The Authority ensures that the intermediation and other operating costs of the National Pension System are economical and reasonable.
• To establish a mechanism for redressal of subscribers determined by the regulations.
• To protect professional organisations that get connected with the pension system.
• To adjudicate disputes that arise between intermediaries and subscribers.
• To collect the data and undertake research, the intermediaries require projects and studies.
• To undertake steps to educate subscribers and the general public on the issues related to the pension, retirement savings and related issues along with training and intermediaries.
• To call for information to undertake inspection, conduct inquiry and investigate the audit of intermediaries and other entities or organisations connected with the pension fund.

Powers of PFRDA:

The Pension Fund Regulatory and Development Authority Act, 2013 provides the power of PFRDA, which are as follow:

• Section 14(3) empowers the PFRDA with the powers of the Civil Courts under the Civil Procedure Code, 1908, while trying the suit related to the discovery or production of the books of accounts and any other document.

  Further, the Authority is empowered to summon and enforce the person’s attendance and examine them on oath. The Authority can inspect any book, register and other documents of any person anywhere to issue a commission to examine witnesses or documents.

• Section 15 empowers the Authority to issue directions in the interest of the subscribers and develop the National Pension System or Pension Scheme.

  This section also empowers the Authority to prevent the affairs of the intermediaries and any other person or entities that are detrimental to the subscribers’ interests. The PFRDA can also secure the proper management of intermediaries.

• Section 16 provides the Authority with the power of investigation. As per this provision, when the Authority has a reasonable ground to believe that the activities of the pension fund are such, they are detrimental to the subscriber’s interests.

  The PFRDA can also investigate when any intermediary or other person associated with the pension fund schemes violates the Act’s provisions or the rules.

• Section 17 empowers the Authority with the power to search and seizure.
• Section 18 empowers the Authority to ensure compliance. As per the provision of this section, if the Authority, after inquiry, finds that the person has violated the Act’s provision, the Authority can pass an order that requires a person to cease or desist from causing the violation.

National Pension System

Section 2(j) of the Pension Fund Regulatory Authority Act, 2013 provides that the contributory pension system includes contributions from the subscriber, collected and accumulated in the individual pension account.

Section 20 of the Act provides that the pension system that the Government notified India on 22nd December 2003 should be considered the National Pension System.

Features of the National Pension System

• Every subscriber should have an individual pension account under the National Pension System.
• The withdrawals of the amount should not exceed twenty-five per cent of the contribution made by the subscriber. Such amounts that exceed twenty-five per cent of the amount can be permitted from the individual pension account subject to the conditions like purpose, frequency and limits provided by the regulations.
• There should be a probability of individual pension accounts when there is a change.
• The choice of the multiple pension fund and schemes

However, the subscriber can invest up to a hundred per cent of the funds he owns into government securities. Also, the person who seeks a minimum assured return should have an option to invest his funds in the schemes that provide a minimum assured return.

Pension Funds

Section 2(l) of the Pension Fund Regulatory and Development Authority Act, 2013 defines the Pension Fund.

Accordingly, Pension Fund is the intermediary which owns a certificate of registration provided by the PFRDA as a Pension Fund to receive a contribution, accumulating from them and making payment to the subscriber in the manner specified by regulations.

Section 23 of the Act provides that the PFRDA can grant a certificate of registration to permit one or more people to act as the pension fund to receive the contribution that accumulates by making a payment to the subscriber. The number of the pension fund should be determined by the regulation and the Authority in the public interest, which may vary the number of pension funds. However, one pension fund should be a government company.

The pension fund should function according to the terms of the certificate of registration. Also, the pension fund manages the schemes according to the regulations. 4

Registration of intermediaries

Section 27 of the Pension Fund Regulatory and Development Authority Act, 2013 provides that no intermediary should include a pension fund to commence an activity related to the pension fund. However, the pension fund can is included according to the condition of the registration certificate granted by the authority.

The application, including the form to grant a certificate, should be in the manner provided by the regulations. Also, the applicant shall pay the required fee with the application.

The PFRDA grant a registration certificate after considering the application and upon fulfilment of the condition. The Authority can also suspend or cancel a certificate of registration granted in the manner determined by the regulation.

Penalty under Pension Fund Regulatory and Development Authority Act, 2013

Section 28 of the Act provides a penalty for the failure by an intermediary or any other person to comply with the provision of the Pension Fund and Regulatory and Development Authority Act, 2013, the rules, regulations and directions. The PFRDA provides the following penalties:

• When a person does an activity without obtaining the certificate where the person is required to obtain a certificate to do such activity, then the person is liable to a penalty of Rs 1 Lakh for each day till the failure continues or one crore rupees, whichever is less.
• When a person fails to comply with the terms and conditions of registration, such person shall be liable to pay Rs 1 Lakh for each day till the failure continues or Rs 1 Crore, which amount is less.
• When a person is required to furnish the information, document, book, return or report to the Authority but fails to do so, such person is liable to a penalty that may extend to one crore rupees or five times the amount of the profits or losses; whichever is higher.
• When a person fails to maintain the books or records, such person shall be liable to pay the number of Rs 1 Lakh per day till the failure continues as a penalty till the failure continues or five times the amount of profit or losses, which is high.
• When a person is required to agree with his client according to the provision of the Act or any rules or regulations but fails to do so is liable to the penalty of Rs 1 Lakh for each day till the failure continues or five times the amount of profit or loss which is high.
• When a registered intermediary is asked by the Authority to redress the grievance of the subscriber but fails to do so, the needful such person is liable to a penalty of a maximum of Rs 1 Lakh or five times the amount of profits or losses, which is high.
• When an intermediary fails to segregate his client’s money or use the client’s money for his purpose, the person is liable to pay a penalty of Rupees one crore or five times the amount of the profit or loss, whichever amount is higher.
• When a person fails to comply with the provision of the Act or follow the rules as provided by the Authority and no penalty is provided under the Act, such person is liable to a penalty that may extend to one crore rupee of five times the amount of profit or loss whichever is less.

Conclusion

The Pension Fund Regulatory and Development Authority is a statutory body created by the Parliament to regulate, promote and maintain the expansion of the National Pension System.

The Authority maintains the National Pension Scheme covered by the Pension Fund Regulatory and Development Authority Act, 2013. It is the central autonomous body that functions as a quasi-government organisation. It is so because it gets empowered with the executive, legislative and judicial powers that are similar to the Reserve Bank of India, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA) and Insolvency and Bankruptcy Board of India (IBBI). In addition, PFRDA is responsible for appointing numerous intermediary agencies like Pension Fund Manager and the Central Record Keeping Agency.