The Pension Fund Regulatory And Development Authority Act 2013 was passed on19 September 2013 and came into force on 1 February 2014. The provisions of the Act are applicable to whole of India. The objective of the act is to establish an authority which enables security to the old age income group by establishing, develop and regulating the pension funds. It also protects the interest of the subscribers of the schemes. Pension Fund Regulatory And Development Authority (PFRDA) regulates the National Pension System (NPS) subscribed by the employees of Govt. Of India and State Government and employees private institutions and unorganized sector
In order to probe into pension policy of India a High Level Expert Group (HLEG) and Old age Social and Income security (OASIS) committee was formed which resulted in the formation of new pension system. Based on the recommendation of the committee the Central Government introduced Defined Contribution Pension system replacing the Defined Benefit Pension System. On 23 August, 2003 an Interim Pension fund Regulatory And Development Authority was established. Later an ordinance was initiated for setting up a statutory Pension Fund Regulatory and Development Authority. Subsequently the PFRDA bill was introduced in Parliament. On 18 Sept 2013 the PFRDA Bill became an enactment by receiving the Presidents assent and became the Pension Fund Regulatory And Development Authority Act 2013.
Section 4 of the Pension Fund Regulation And Development Authority Act, 2013 deals with the composition of the authority. Accordingly the Authority shall consist of a chairperson; three whole time members; and three part time members. These members are appointed by the Central Government from amongst persons of ability, integrity and standing and having knowledge and experience in economics or finance or law with at least one person with each discipline. The chairperson shall hold the office for a term of five years from the date of commencement of his appointment.
The contributory pension system was renamed and came to be known as National Pension System came into effect 1 Jan 2004.The NPS extends to all citizens of India (except the armed forces) including self employed professionals and unorganized sector on a voluntary basis. The NPS works on a defined contribution basis. It consists of two tiers Tier-1(Pension Account) and Tier-2(Savings Account). The difference between the two accounts is that contribution to the Tier1 account is compulsory for all the government servants while tier 2 accounts will be based on the discretion of the employee. Another major point of difference is that Tier1 is a non withdrawable account and Tier 2 is witharwable account in order to meet financial contingencies. Government will not make any contribution to Tier 2 account. For the proper functioning of the scheme a Central Record Keeping Agency and several Pension Fund Managers are established. The Fund Managers shall offer three types of scheme option A, B and C. The allotment of the scheme to the Government servants shall be based on the proportion of investment in fixed income instruments and equities. It shall be the duty of the PFMs and CRA to give out easily understood information about past performance so that individual is able to make informed choice as to which scheme to enter into.
According to a projection of United Nations Population Fund (UNFPA) report there shall be a rapid increase of 326% in number of people aged between 60 and 80 by the year 2050 when compared to year 2000 and a 700% increase in the number of people older than age of 80. Considering the change in population composition of India there is a dire need to create an authority which provided social security to ageing population of India by regulating and developing Pension Funds. It also provides the subscriber an ample choice to invest their funds and in return get assured returns. The PFRDA Act 2013 is a key socioeconomic legislation which assures the subscriber minimum returns and is based on the principle that “you save while you earn”.