The Hindu Business Line : Ordinance on pension regulator issued

THE Government on Thursday promulgated an Ordinance that would pave the way for establishing the Pension Fund Regulatory and Development Authority (PFRDA).

The PFRDA, which will be a statutory regulatory body, would undertake promotional, developmental and regulatory functions in respect of the pension sector. It will come into being from January 1. With its headquarters in New Delhi, PFRDA will have a chairperson and five members, of which three would be whole-time members.

"The Chairperson will retire at the age of 65 years, while the members at 62 years," a senior Finance Ministry official said. The Chairperson would be soon appointed, the official added.

The Ordinance has empowered the PFRDA to regulate the New Pension System (NPS), as amended by the Central Government from time to time. The PFRDA would also prescribe guidelines on the number of players, prudential norms, investment criteria and capital requirement of pension fund managers.

It may be recalled that a defined contribution pension scheme had been introduced with effect from January 1, 2004 for Central Government employees recruited on or after that date (except Armed Forces, in the first stage). The defined contribution pension scheme had replaced the existing defined benefit pension system. Pending establishment of the full institutional architecture of the New Pension System (NPS), an interim arrangement had been put in place.

As far as pre-January 1, 2004 Central Government employees are concerned, the Finance Ministry official said that they would draw the Government pension but are entitled to join the new scheme voluntarily as an additional benefit.

The Finance Minister, Mr P. Chidambaram, had in his Budget speech in July this year announced that suitable legislation to provide a regulatory framework for the NPS would be put in place.

As the number of new entrants (more than 40,000) who are mandatorily covered under the NPS was increasing, it was felt that a regulatory framework, including a statutory regulator, was urgently required in public interest. The Government had on November 11, 2004 approved a proposal to promulgate an ordinance to operationalise the Budget announcement.

An official release said that the ordinance could not, however, be promulgated as in the meantime Parliament was summoned for the winter session. On December 27, 2004, Government approved a proposal to promulgate an ordinance.

Besides framing regulations/guidelines and prescribing disclosure standards, the PFRDA has also been empowered to curb fraudulent and unfair practices in pension funds and protect the interests of the subscribers to the schemes of pension funds.

All appeals against the orders and decisions of PFRDA would lie with the Securities and Appellate Tribunal.

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