Amendments to National Pension System Trust (NPST) and Pension Fund Regulations

National Pension System Trust (NPST) and Pension Fund Regulations have recently seen significant amendments through the National Pension System Trust (Second Amendment) Regulations 2023 and Pension Fund (Amendment) Regulations 2023.

• These amendments aim to enhance the efficiency and transparency of the National Pension System (NPS) and Pension Funds.

Amendments to NPS Trust Regulations:

• Simplify the provisions related to appointment of Trustees, their terms and conditions, holding of meetings of Board of Trustees and appointment of CEO.

About NPS:

• Launched in 2004, the NPS is a defined-contribution pension system designed to offer retirement income to all citizens. Its objective is to promote retirement savings and bring about reforms in pensions.
• The Scheme is regulated by PFRDA.
• National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.

Pension Fund:

• Amendments to Pension Fund Regulations simplify the provisions related to governance of Pension Funds in line with Companies Act, 2013 and enhanced disclosure by Pension Funds.
• Pension Funds are now mandated to constitute additional Board committees, including an Audit Committee and a Nomination & Remuneration Committee.
• PFRDA has brought pension funds within the ambit of Prevention of Money Laundering Act (PMLA), tightening the oversight on these entities.
• Requirement for existing pension funds to include ‘Pension Fund’ in their name clause, with a stipulated compliance period of 12 months.
• The concept of ‘fit and proper’ criteria has been introduced for Principal Officers of both sponsors and pension funds.
  • These norms are similar to those existing under SEBI for ensuring the suitability of individuals holding key positions.
• PFRDA has introduced specific regulations on the computation of the net asset value for pension fund schemes.

Central Recordkeeping Agency (CRA) (Amendment) Regulations, 2023:

• The CRA maintains records of contributions and their deployment in various pension fund schemes for employees.
• It also provides accounting and administration services, and customer services for subscribers who have joined the CRA.
• Amendments to CRA Regulations simplify and strengthen the provisions related to governance of CRA in line with Companies Act, 2013 and enhanced disclosure of information by CRA.
• Implementation of fraud prevention and mitigation policy by CRA to protect the interest of subscribers.
• Inclusion of certificate by CEO in the annual report in respect of adequacy and effectiveness of internal controls, compliance and audit processes.
• Criteria of ‘fit and proper person’ has been introduced for CRA and its key personnel.

Trustee Bank (TB) Regulations:

• A trustee bank is an intermediary that manages the day-to-day banking of funds for the National Pension System (NPS).
• The trustee bank also provides banking facilities in accordance with the guidelines and directions issued by the PFRDA.
• The amendments to TB Regulations simplify and strengthen the provisions related to implementation of fraud prevention and mitigation policy, compensation to the subscriber, invitation of application for new registration and surrender of certificate of registration.
• TB requires prior PFRDA approval for any proposed changes in its status or constitution.

About Pension Fund Regulatory and Development Authority:

• PFRDA is the regulatory body for overall supervision and regulation of pensions in India.
• It operates under the jurisdiction of Ministry of Finance.
• It was established in 2003 based on the recommendations of the Indian government OASIS report and was part of the establishment of the Indian National Pension Scheme.
• PFRDA is responsible for the following:
  • Developing, promoting, and regulating pension funds.
  • Regulating the National Pension System (NPS).
  • Appointing intermediaries in the system, such as pension funds, custody, and NPS trustee banks.
  • Monitoring the performance of intermediaries.

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