PFRDA may regulate unregulated pension funds

The Department of Financial Services (DFS), which functions under the finance ministry, is examining a proposal to bring all unregulated retirement funds under the purview of the Pension Fund Regulatory and Development Authority (PFRDA).

• DFS is looking at forming a panel to look into the matter and study the scale of unregulated superannuation funds in the country to protect subscribers’ interest.
• The idea is basically to reduce the grey areas and close down the regulatory gaps. However, the matter is complex as multiple ministries are involved.

Background:

PFRDA has been pitching that all unregulated pension funds in the country be regulated. Under the proposed PFRDA Act, the pension regulator is responsible for promoting the pension fund industry and protecting consumers by supervising these funds. Currently, it is responsible only for regulating the National Pension System (NPS) and the Atal Pension Yojana.

• A number of companies extend superannuation schemes to employees through insurance companies or set up their own PF trusts. Many of these trusts are under the ambit of Sebi, Irdai or EPFO. They all seek tax exemptions from the Central Board of Direct Taxation (CBDT).
• PFRDA has been trying to accumulate information on existing pension and superannuation schemes being run by various entities and details of their regulatory jurisdiction, supervisory mechanism, investment guidelines, risk management strategies, number of subscribers and assets under their management.

PFRDA:

The Pension Fund Regulatory and Development Authority (PFRDA) is a pension regulatory authority which was established in 2003. It is authorized by Ministry of Finance, Department of Financial Services.

• It is also responsible for appointment of various intermediate agencies such as Central Record Keeping Agency (CRA), Pension Fund Managers, Custodian, NPS Trustee Bank, etc.