Sunday, 6 October 2013

Pension Fund Regulatory And Development Authority Bill (PFRDA) Bill, 2011

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Current Status: Passed by the Lok Sabha on September 04, 2013; Passed by
Rajya Sabha on September 06, 2013. Ministry: Finance
The Pension Fund Regulatory and Development Authority Bill (PFRDA) Bill 2011 provides
for the establishment of an Authority to promote old age income security by establishing,
developing and regulating pension funds, to protect the interests of subscribers to schemes
of pension funds and for matters connected therewith or incidental thereto.
An Interim Authority has already been created vide Govt Resolution dated 10th October
2003 and 14th November 2008 and is fully functional. The passage of the bill will confer
statutory status to the Interim PFRDA to develop and regulate National Pension System
(NPS) earlier known as New Pension Scheme.
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The PFRDA, 2011 was passed by the Lok Sabha on September 4 with official amendments.
Rajya Sabha passed it on September 6, 2013. It was earlier introduced in Lok Sabha on the
24th March, 2011 to provide for a statutory regulatory body the Pension Fund Regulatory
and Development Authority (PFRDA) under the provisions of the Bill. The legislation seeks
to empower PFRDA
to regulate the New Pension System (NPS).

What Is NPS?
The National Pension System reflects Government’s effort to find sustainable solutions to the
problem of providing adequate retirement income. NPS is an easily accessible, low cost, taxefficient,
flexible and portable retirement savings account. Under the NPS, the individual
contributes to his retirement account and also his employer can also co-contribute for the
social security/welfare of the individual.

NPS is designed on Defined contribution basis wherein the subscriber contributes to his
account, there is no defined benefit that would be available at the time of exit from the
system and the accumulated wealth depends on the contributions made and the income
generated from investment of such wealth. Eventual pension wealth is based on the level of
contributions made over the years, the charges (administrative and fund management)
deducted from the funds and the returns achieved by the investment fund (pension fund
managers) used over a period of time during the accumulation phase in NPS.

The greater the value of the contributions made, the greater the investments achieved, the
longer the term over which the fund accumulates and the lower the charges deducted, the
larger would be the eventual benefit of the accumulated pension wealth likely to be.
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The NPS has been made mandatory for all the central Government employees (except armed
forces) entering service with effect from 1.1.2004. Twenty six (26) States have already
notified NPS for their employees. NPS has been launched for all citizens of the country
including unorgnised sector workers, on voluntary basis, with effect from 1st May, 2009.

Further, to encourage the people from the un-organised sector to voluntarily save for their
retirement, the Government has launched the co-contributory pension scheme titled
“Swavalamban Scheme” in the Budget of 2010-11. As on 14th August, 2013, the number of
subscribers under NPS is 52.83 Lakh with a corpus of Rs.34, 965 crore. In order to effectively
invest and manage huge funds belonging to a large number of subscribers and to ensure the
integrity of NPS, creation of a statutory PFRDA with well defined powers, duties and
responsibilities is considered absolutely necessary and would benefit all NPS subscribers.
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