PFRDA Current Affairs - 2019
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As per the PFRDA-CRISIL report titled, Financial security for India’s elderly – The imperatives, India will begin ageing gradually and transform from ‘young’ to a ‘greying’ with every 5th Indian to be in 60s in contrast to every 12th person at present. By 2050, persons above the age of 60 would increase from the present 8.9% of the population to 19.4 %. Also, by 2050, the population of people above 80 is likely to increase from 0.9% to 2.8%. As of 2015, almost 90% of the population was below the age of 60 years and the proportion of working age population stood at 44% .
The report has stated that the continuously declining inter-generational support within families necessitates the development of well-developed, self- sustaining pension system in the country. The report calls for including personal finance and retirement planning as a part of formal education curriculum as they promote the overall objective of financial literacy.
The promotion of pension system is vital as it helps in achieving twin objectives of providing income security to a vast number of ageing population. It also helps in garnering long-term funds for critical, growth-driving sectors of the economy as also the capital market. Hence, the report has called for sufficient incentivisation of intermediaries to increase penetration of pension system in the country.
In India, which is an under-penetrated financial market has most of the investors preferring to invest in fixed deposits (FDs), which account for more than 44% of the financial savings as opposed to the provident and pension funds which accounts to just 14% of the savings that are primarily fed by the organised section of the society. The report has observed that in India, increasing the penetration of pension products via voluntary pension schemes is the biggest hurdle in developing the pension system.
Atal Pension Yojna
Atal Pension Yojana was launched in June 2015 to make the unorganized work force, which makes major chunk of India’s labour force (88%) join the National Pension Scheme. The subscribers of Atal Pension Yojana can receive a fixed monthly pension starting from Rs. 1000 up to Rs. 5000 after their retirement age of 60 until death. After the death of the subscriber, the spouse will be entitled to get exact same pension amount as the subscriber, until death of the spouse. The minimum age of joining APY is 18 years and maximum age is 40 years and thus minimum period of contribution by subscriber is 20 years.
The Union Finance Ministry has constituted a high-level committee to consolidate the regulation of pension products that is currently being done by three different watchdogs including insurance and stock market regulators.
The committee would have representatives from all financial sector regulators SEBI, IRDA, RBI and PFRDA. Its mandate will be to look into the issue of bringing these companies which are offering pension plans under different regulators under the purview of PFRDA.
- PFRDA: Pension Fund Regulatory and Development Authority.
- SEBI: Securities and Exchange Board of India.
- IRDA: Insurance Regulatory and Development Authority of India.
- RBI: Reserve Bank of India.
Why there is need to consolidate regulation of pension products?
The PFRDA Act says that PFRDA will be the pension regulator in the country. Currently, pension products floated by insurance companies and those sold by mutual funds are under purview of IRDA and SEBI respectively. Thus, there are cases of overlapping functions performed by financial sector regulators SEBI, IRDA, RBI and PFRDA in case of floating different pension products. For instance PFRDA is regulating all pension products in the country. However, insurers and mutual funds continue to sell pension products outside PFRDA’s watch. The PFRDA Act says that PFRDA will be the pension regulator in the country.
About Pension Fund Regulatory and Development Authority (PFRDA)
- PFRDA is a statuary pension regulatory authority established in 2003 under the PFRDA Act.
- It functions under the aegis of Union Ministry of Finance, Department of Financial Services.
- PFRDA promotes old age income security by establishing, developing and regulating pension funds.
- It also protects interests of subscribers to schemes of pension funds and related matters.
- It is responsible for appointment of various intermediate agencies such as Central Record Keeping Agency (CRA), Custodian, Pension Fund Managers, NPS Trustee Bank, etc.