PFRDA was established by Government of India on 23rd August, 2003. The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
The New Pension System reflects Government’s effort to find sustainable solutions to the problem of providing adequate retirement income. As a first step towards instituting pensionary reforms, Government of India moved from a defined benefit pension to a defined contribution based pension system by making it mandatory for its new recruits (except armed forces) with effect from 1st January, 2004.
Since 1st April, 2008, the pension contributions of Central Government employees covered by the New Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to non-Government Provident Funds. Twenty eight (28) State/UT Governments have also notified the New Pension System for their new employees. Of these, 24 states have already signed agreements with the intermediaries of the NPS architecture appointed by PFRDA for carrying forward the implementation of the New Pension System. The other States are in the process of finalisation of documentation. NPS has been made available to every citizen from 1st April, 2009 on a voluntary basis.
The NPS architecture is transparent and will be web-enabled. It would allow a subscriber to monitor his/her investments and returns under NPS, the choice of Pension Fund Manager and the investment option would also rest with the subscriber. The design allows the subscriber to switch his/her investment options as well as pension funds. The facility for seamless portability and switch between PFMs is designed to enable subscribers to maintain a single pension account throughout their saving period. PFRDA has set up a Trust under the Indian Trusts Act, 1882 to oversee the functions of the PFMs.
The NPS Trust is composed of members representing diverse fields and brings wide range of talent to the regulatory framework. The New Pension System has been designed to enable the subscriber to make optimum decisions regarding his/her future and provide for his/her old-age through systemic savings from the day he/she starts his/her employment. It seeks to inculcate the habit of saving for retirement amongst the citizens.
PFRDA also intends to intensify its effort towards financial education and awareness as a part of its strategy to protect the interest of the subscribers. PFRDA’s efforts are an important milestone in the development of a sustainable and efficient voluntary defined contribution based pension system in India.